Measuring the Output Responses to Fiscal Policy

Alan Auerbach and Yuriy Gorodnichenko

No 16311, NBER Working Papers from National Bureau of Economic Research, Inc

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-codes: E32 E62 (search for similar items in EconPapers)
Date: 2010-08
New Economics Papers: this item is included in nep-cba and nep-mac
Note: EFG PE
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Citations: View citations in EconPapers (97)

Published as Alan J. Auerbach & Yuriy Gorodnichenko, 2012. "Measuring the Output Responses to Fiscal Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 1-27, May.
Published as Measuring the Output Responses to Fiscal Policy , Alan J. Auerbach, Yuriy Gorodnichenko. in Fiscal Policy (Trans-Atlantic Public Economics Seminar, TAPES) , Gordon and Perotti. 2012

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Journal Article: Measuring the Output Responses to Fiscal Policy (2012)
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