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Macroeconomic Effects of Government Spending Shocks: New Narrative Evidence from Canada

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  • Syed Hussain
  • Lin Liu

Abstract

This paper examines the macroeconomic effects of government spending shocks in Canada for the period of 1949 - 2012. We construct a novel measure of news about exogenous government spending changes identified through the narrative approach. We use government documents, mostly the budget speech, to identify the size, timing, and principal motivation for all planned major federal government spending changes. To achieve identification, we consider those changes that are unrelated to the contemporaneous movements in the economy. The implied government spending multiplier estimates using our exogenous government spending news series are between 0.84 and 1.55.

Suggested Citation

  • Syed Hussain & Lin Liu, 2022. "Macroeconomic Effects of Government Spending Shocks: New Narrative Evidence from Canada," Working Papers 202201, University of Liverpool, Department of Economics.
    • Handle: RePEc:liv:livedp:202201
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    References listed on IDEAS

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    More about this item

    Keywords

    Government Spending Shocks; Government Spending Multiplier; Narrative Accounts; Canada;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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