Procyclical and countercyclical fiscal multipliers: Evidence from OECD countries

Riera‐Crichton, Daniel; Végh, Carlos A.; Vúletin, Guillermo

doi:10.1016/j.jimonfin.2014.11.011

Cited by 94 publications

(29 citation statements)

References 10 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…For instance, Tagkalakis (2008) finds that, in the OECD, fiscal policy has a larger effect on consumption in recessions than in expansions; and that this effect is more pronounced in countries that have a less-developed consumer credit market. Similarly, Auerbach and Gorodnichenko (2012), Bachmann and Sims (2012) and Riera-Crichton et al (2014) find State-dependent multipliers that are large during recessions. Auerbach and Gorodnichenko (2012) use regime switching SVARs to show that output multipliers are countercyclical.…”

mentioning

confidence: 88%

“…When they ignore the distinction between recessions and expansions, they obtain an estimate close to 1, which is typical of estimates in most of the empirical literature. Riera-Crichton et al (2014) offer a more careful analysis of state dependence by arguing that because government spending is not cyclical, the proper way to estimate the degree of state dependence is to condition not only on the state of the business cycle but also on the sign/size of the fiscal intervention. They find that fiscal expansions in recessions are much more expansionary than fiscal expansions in booms.…”

mentioning

confidence: 99%

See 1 more Smart Citation

Fiscal Multipliers in Recessions

Canzoneri

Collard

Dellas

et al. 2016

The Economic Journal

163

110

View full text Add to dashboard Cite

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 EconStor may University of Bern Georgetown UniversityMay 2011 AbstractThe Great Recession, and the fiscal response to it, has revived interest in the size of fiscal multipliers. Standard business cycle models have difficulties generating multipliers greater than one. And they also fail to produce any significant asymmetry in the size of the multipliers over the business cycle. In this paper we employ a variant of the Curdia-Woodford model of costly financial intermediation to show that fiscal multipliers are strongly countercyclical. In particular, they can take values exceeding two during recessions, declining to values below one during expansions.JEL class: E32, E62, H3

show abstract

mentioning

confidence: 88%

mentioning

confidence: 99%

Fiscal Multipliers in Recessions

Canzoneri

Collard

Dellas

et al. 2016

The Economic Journal

163

110

View full text Add to dashboard Cite

show abstract

“…where H = {h 1 , ..., h H } ⊆ N H is a set of projection points such that h 1 < h 2 < · · · h H , y t+h is an endogenous variable observed at period t+h, α (h) is an intercept, z t is an exogenous variable observed at period t, w 1,t , ..., w J−2,t are covariates, which may include lags of the endogenous and exogenous variables, β (h) and γ j,(h) are unknown coefficients, and u (h),t+h is a residual. The model allows asymmetric and/or state-dependent impulse responses, as in Riera-Crichton et al (2015), Auerbach and Gorodnichenko (2013), and Ramey and Zubuairy (2018). The definition of y t+h and z t depends on whether the model is used for an impulse response analysis or forecasting.…”

Section: Modelmentioning

confidence: 99%

“…First, it does not impose a strong assumption on the data-generating process, making it robust to misspecification. Second, it can easily deal with asymmetric and/or state-dependent impulse responses (e.g., Riera-Crichton et al, 2015;Auerbach and Gorodnichenko, 2013;Ramey and Zubuairy, 2018). On the other hand, local projections have several disadvantages.…”

Section: Introductionmentioning

confidence: 99%

Bayesian Inference of Local Projections with Roughness Penalty Priors

Tanaka

2019

Comput Econ

View full text Add to dashboard Cite

A local projection is a statistical framework that accounts for the relationship between an exogenous variable and an endogenous variable, measured at different time points. Local projections are often applied in impulse response analyses and direct forecasting. While local projections are becoming increasingly popular because of their robustness to misspecification and their flexibility, they are less statistically efficient than standard methods, such as vector autoregression. In this study, we seek to improve the statistical efficiency of local projections by developing a fully Bayesian approach that can be used to estimate local projections using roughness penalty priors. By incorporating such prior-induced smoothness, we can use information contained in successive observations to enhance the statistical efficiency of an inference. We apply the proposed approach to an analysis of monetary policy in the United States, showing that the roughness penalty priors successfully estimate the impulse response functions and improve the predictive accuracy of local projections.

show abstract

“…These papers find that the multiplier is higher when there is economic slack. Riera-Crichton, Vegh, and Vuletin (2015) additionally distinguish the state between government spending increases and decreases and apply the local projection method to OECD countries' data. They find that the multiplier is largest in the state of recession with government spending increases.…”

Section: Introductionmentioning

confidence: 99%

What Do British Historical Data Tell Us About Government Spending Multipliers?

Watanabe

2018

Economic Inquiry

View full text Add to dashboard Cite

British data from the early 1700s through World War I reflect the results of numerous high-quality natural experiments of government spending. Britain frequently participated in wars, increasing military spending massively. Wartime distortions were relatively limited because the government generally adopted tax smoothing policy and rarely implemented interventions. Government spending multiplier estimates are low or negative and significantly below unity. This paper finds no evidence that the multiplier was higher in the slack state than in the normal state. (JEL E32, E62)

show abstract

Procyclical and countercyclical fiscal multipliers: Evidence from OECD countries

Cited by 94 publications

References 10 publications

Fiscal Multipliers in Recessions

Fiscal Multipliers in Recessions

Bayesian Inference of Local Projections with Roughness Penalty Priors

What Do British Historical Data Tell Us About Government Spending Multipliers?

Contact Info

Product

Resources

About