American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Measuring the Output Responses to Fiscal Policy
American Economic Journal: Economic Policy
vol. 4,
no. 2, May 2012
(pp. 1–27)
(Complimentary)
Abstract
A key issue in current research and policy is the size of fiscal multipliers when the economy is in recession. We provide three insights. First, using regime-switching models, we find large differences in the size of spending multipliers in recessions and expansions with fiscal policy being considerably more effective in recessions than in expansions. Second, we estimate multipliers for more disaggregate spending variables which behave differently relative to aggregate fiscal policy shocks, with military spending having the largest multiplier. Third, we show that controlling for predictable components of fiscal shocks tends to increase the size of the multipliers in recessions. (JEL C32, E62, H20, H62, H63)Citation
Auerbach, Alan J., and Yuriy Gorodnichenko. 2012. "Measuring the Output Responses to Fiscal Policy." American Economic Journal: Economic Policy, 4 (2): 1–27. DOI: 10.1257/pol.4.2.1Additional Materials
JEL Classification
- C32 Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E62 Fiscal Policy
- H20 Taxation, Subsidies, and Revenue: General
- H62 National Deficit; Surplus
- H63 National Debt; Debt Management; Sovereign Debt
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