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Spending Multipliers and the Party in Power: Evidence from United States Political Cycles

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  • Francesco Morelli

    (Link Campus University)

Abstract

I analyze U.S. government spending multipliers conditional on the political cycle. The results indicate that, in many specifications, multipliers are positive during second terms and negative during first terms. Moreover, across all formulations, multipliers are positive under Democratic administrations and negative under Republican administrations. These findings are robust to alternative controls and model specifications, and they underscore the pivotal role of political expectations in shaping the sign and magnitude of fiscal spending multipliers.

Suggested Citation

  • Francesco Morelli, 2025. "Spending Multipliers and the Party in Power: Evidence from United States Political Cycles," CEIS Research Paper 617, Tor Vergata University, CEIS, revised 17 Nov 2025.
    • Handle: RePEc:rtv:ceisrp:617
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    References listed on IDEAS

    as
    1. Bilbiie, Florin O., 2008. "Limited asset markets participation, monetary policy and (inverted) aggregate demand logic," Journal of Economic Theory, Elsevier, vol. 140(1), pages 162-196, May.
    2. Pascal Michaillat, 2014. "A Theory of Countercyclical Government Multiplier," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(1), pages 190-217, January.
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    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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