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/lp/american-economic-association/measuring-the-output-responses-to-fiscal-policy-19gJRfLcQm
- Publisher
- American Economic Association
- Copyright
- Copyright © 2012 by the American Economic Association
- Subject
- Articles
- ISSN
- 1945-7731
- eISSN
- 1945-774x
- DOI
- 10.1257/pol.4.2.1
- Publisher site
- See Article on Publisher Site
Abstract
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 )
Journal
American Economic Journal: Economic Policy – American Economic Association
Published: May 1, 2012