Fiscal Multipliers and the State of the Economy

Baum, Andrew; Poplawski-Ribeiro, Marcos; Weber, Anke

doi:10.5089/9781475565829.001

Cited by 264 publications

(184 citation statements)

References 22 publications

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“…While there is a significant amount of empirical studies on the asymmetry of fiscal multipliers (Auerbach and Gorodnichenko, 2012 a,b;and Baum et al, 2012), the theoretical literature on the topic is scarce. One notable exception is Michaillat (2014), who finds in a search-and-matching framework that fiscal multipliers are higher in recessions.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Rather than relying on regime-switching models to estimate state-dependent multipliers (Auerbach and Gorodnichenko, 2012;Baum et al, 2012;and Batini et al, 2012), we use the local projection method (Jordà, 2005) as in Jordà and Taylor (2013) and Ramey and Zubairy (2013). As in Guajardo et al (2014) and Alesina et al (2013), we emphasize the distinction between tax-based and expenditure-based consolidations.…”

Section: Literature Reviewmentioning

confidence: 99%

“…To accommodate the possibility of the multiplier varying in different states of the economy (Baum et al, 2012), we allow regression coefficients to differ in PR and non-PR periods (see also Ramey and Zubairy, 2013):…”

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confidence: 99%

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Medium-Term Fiscal Multipliers during Protracted Recessions

Dell’Erba¹,

Poplawski-Ribeiro²,

Koloskova³

2014

IMF Working Papers

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The paper examines the consequences of fiscal consolidation in times of persistently low growth and high unemployment by estimating medium-term fiscal multipliers during protracted recessions (PR) in a sample of 17 OECD countries. Based on Jorda's (2005) local projection methodology, we find that cumulative fiscal multipliers related to output, employment and unemployment at five-year horizons are significantly above one during PR episodes. These results suggest that medium-term fiscal consolidation plans to reduce public debt burdens should proceed gradually if economic activity remains below trend for a prolonged period. JEL Classification Numbers: E32, E62, H20, H50, J40

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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Medium-Term Fiscal Multipliers during Protracted Recessions

Dell’Erba¹,

Poplawski-Ribeiro²,

Koloskova³

2014

IMF Working Papers

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“…In this context, some studies have found that fiscal multipliers in advanced economies tend to be higher in downturns, and especially when the zero lower bound on the nominal interest rate binds (Christiano et al (2011)), than in expansions (see, e.g., Auerbach and Gorodnichenko (2012), Baum et al (2012), Batini et al (2012)). Differently from these papers, Owyang et al (2013) suggest that, when considering a longer time period (i.e., from 1890 to 2010), there is no strong evidence that multipliers are higher during recessions in the United States.…”

Section: Related Literature and Comparison With Our Resultsmentioning

confidence: 99%

Combining Time-Variation and Mixed-Frequencies: An Analysis of Government Spending Multipliers in Italy

D’Agostino

Cimadomo

2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn this paper, we propose a time-varying parameter VAR model with stochastic volatility which allows for estimation on data sampled at different frequencies. Our contribution is twofold. First, we extend the methodology developed by Cogley and Sargent (2005), and Primiceri (2005), to a mixed-frequency setting. In particular, our approach allows for the inclusion of two different categories of variables (high-frequency and low-frequency) into the same time varying model. Second, we use this model to study the macroeconomic effects of government spending shocks in Italy over the 1988Q4-2013Q3 period. Italy -as well as most other euro area economies -is characterised by short quarterly time series for fiscal variables, whereas annual data are generally available for a longer sample before 1999. Our results show that the proposed timevarying mixed-frequency model improves on the performance of a simple linear interpolation model in generating the true path of the missing observations. Second, our empirical analysis suggests that government spending shocks tend to have positive effects on output in Italy. The fiscal multiplier, which is maximized at the one year horizon, follows a U-shape over the sample considered: it peaks at around 1.5 at the beginning of the sample, it then stabilizes between 0.8 and 0.9 from the mid-1990s to the late 2000s, before rising again to above unity during of the recent crisis. Non-technical summaryThe scope for conducting empirical analysis in the fiscal policy field, as well as in other economic fields, is sometimes limited by the unavailability of high frequency data or by the short length of these time series. Indeed, most econometric models -such as vector autoregressions (VARs) -typically need relatively long time series of data to obtain meaningful and robust estimates. As regards fiscal policy, most time series for euro area countries are available at the annual frequency prior to 1999 and at the quarterly frequency only beginning in 1999. This has contributed to prevent a rapid development of the literature on the macroeconomic effects of fiscal policies for these countries.To address the problem of insufficiently long high-frequency time series, data sampled at different frequencies and, in general, irregular data patterns, a very rich research has soared which is generally Our results indicate that, first, our time-varying mixed-frequency model well tracks the data in-sample. Second...

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“…Auerbach and Gorodnichenko [2012b] and Batini et al [2012] obtain similar results by looking at a larger sample of OECD countries. Baum et al [2012] adopt a non-linear threshold VAR and -more importantly for our purposes -use output gap (rather than GDP growth) to define the cycle and better identify business fluctuations (see also Harding and Pagan [2002]). They investigate six of the G7 economies from the 1970s to 2011 and find that in all cases the magnitude of the multiplier size is increasing with the negative output gap.…”

Section: The Modelmentioning

confidence: 99%

Potential Output and Fiscal Rules in a Monetary Union Under Asymmetric Information

Marattin¹,

Meraglia²

2015

SSRN Journal

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We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information about member states' potential output and, therefore, output gap and (ii) bail-out among member states. In our framework, bail-out lowers the scope for signalling (discrimination) by member states (lenders). In the presence of asymmetric information, bail-out and national governments' shortsightedness make the first-best fiscal rule non-implementable as member states are tempted to run excessively high deficits.The Monetary Union designs a mechanism such that member states with high output gap (i.e., in a recession) run higher budget deficits by making an ex-post transfer to the Union. We find that the first-best deficit is contingent on the cycle -i.e., on the member state's output gap -and, all else equal, can be implemented provided the member states' ability to repay its own debt upon the realization of a bad shock is sufficiently high. A downward distortion in the deficit run by a member state during an expansion is otherwise introduced. Finally, the Monetary Union cannot discriminate among types of borrowers when national governments are excessively shortsighted.

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Fiscal Multipliers and the State of the Economy

Cited by 264 publications

References 22 publications

Medium-Term Fiscal Multipliers during Protracted Recessions

Medium-Term Fiscal Multipliers during Protracted Recessions

Combining Time-Variation and Mixed-Frequencies: An Analysis of Government Spending Multipliers in Italy

Potential Output and Fiscal Rules in a Monetary Union Under Asymmetric Information

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