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Government spending multipliers in contraction and expansion

Listed author(s):
  • Walid Qazizada
  • Engelbert Stockhammer

This paper investigates the impact of government spending on output and the size of the spending multiplier during periods of output contraction vs. expansion. It also investigates the impact of spending when the economy hits the nominal zero lower bound. It uses a panel of 21 advanced countries over the period of 1979-2011, applying a TSLS estimation technique. We find a spending multiplier of close to 1 during expansion and values of up to 3 during contractions. However, our results do not indicate a difference in the impact of spending during nominal zero lower bound periods.

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File URL: http://www.postkeynesian.net/downloads/working-papers/PKWP1404.pdf
File Function: First version, 2014
Download Restriction: no

Paper provided by Post Keynesian Economics Study Group (PKSG) in its series Working Papers with number PKWP1404.

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Length: 30
Date of creation: May 2014
Handle: RePEc:pke:wpaper:pkwp1404
Contact details of provider: Web page: http://www.postkeynesian.net

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