Should we trust cross sectional multiplier estimates?

Fabio Canova

No 15330, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: I examine the properties of cross sectional estimates of multipliers, elasticities, or pass-throughs when the data is generated by a conventional multi-unit time series specification. A number of important biases plague estimates; the most relevant one occurs when the cross section is not dynamic homogenous. I suggest methods that can deal with this problem and show the magnitude of the biases cross sectional estimators display in an experimental setting. I contrast average time series and average cross sectional estimates of local fiscal multipliers for US states.

Keywords: Cross sectional methods; Dynamic heterogeneity; Partial pooling; Fiscal multipliers; Monetary pass-through (search for similar items in EconPapers)
JEL-codes: E0 H6 H7 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-ecm, nep-mac and nep-ore
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Citations: View citations in EconPapers (5)

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