Decomposing the Fiscal Multiplier

James Cloyne, Oscar Jorda and Alan Taylor

No 26939, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The fiscal “multiplier” seeks to measure how many additional dollars of output are gained or lost for each dollar of fiscal expansion or contraction. In practice, the multiplier at any point in time depends on the monetary policy response and existing conditions in the economy. Using the IMF fiscal consolidations dataset for identification and a new decomposition-based approach, we show how to quantify the importance of these monetary-fiscal interactions. In the data, the fiscal multiplier varies considerably with monetary policy: it can be as small as zero, or as large as 2, depending on the monetary offset. More generally, we show how to decompose the typical macro impulse response function by extending local projections to carry out the well-known Kitagawa-Blinder-Oaxaca decomposition. This provides a convenient way to evaluate the effects of policy, state-dependence, time-variation, and the balance conditions for identification.

JEL-codes: C54 C99 E32 E62 H20 H5 N10 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-mac and nep-pub
Note: EFG IFM ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.nber.org/papers/w26939.pdf (application/pdf)

Related works:
Working Paper: Decomposing the Fiscal Multiplier (2020)
Working Paper: Decomposing the Fiscal Multiplier (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:26939

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26939

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().