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Government Spending and Consumption at the Zero Lower Bound: Evidence from Household Retail Purchase Data


  • Marios Karabarbounis

    (Federal Reserve Bank of Richmond)

  • Marianna Kudlyak

    (Federal Reserve Bank of Richmond)

  • M. Saif Mehkari

    (University of Richmond)

  • Bill Dupor

    (Federal Reserve Bank of St. Louis)


This paper uses cross-regional variation in the fiscal stimulus of 2009-2013 to analyze the effects of government spending on household-level consumption when the nominal interest rate is zero. The key novelty is the construction of a comprehensive measure of local consumption expenditures using (i) household-level retail purchase data using Nielsen Homescan Consumer Panel and (ii) state-level consumption data from the BEA. Most of our specifications point toward a significantly positive consumption multiplier around 0.25 for non-durable consumption. We translate our regional multiplier into an aggregate multiplier using a heterogeneous agents, New Keynesian model with multiple regions and input linkages.

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  • Marios Karabarbounis & Marianna Kudlyak & M. Saif Mehkari & Bill Dupor, 2016. "Government Spending and Consumption at the Zero Lower Bound: Evidence from Household Retail Purchase Data," 2016 Meeting Papers 1463, Society for Economic Dynamics.
  • Handle: RePEc:red:sed016:1463

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    References listed on IDEAS

    1. Greg Kaplan & Giovanni L. Violante, 2014. "A Model of the Consumption Response to Fiscal Stimulus Payments," Econometrica, Econometric Society, vol. 82(4), pages 1199-1239, July.
    2. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1329-1368.
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