HETEROGENEOUS GOVERNMENT SPENDING MULTIPLIERS IN THE ERA SURROUNDING THE GREAT RECESSION

Marco Bernardini, Selien De Schryder and Gert Peersman ()

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: We use a novel quarterly dataset of U.S. states to examine the dynamics and determinants of relative government spending multipliers in the decade surrounding the Great Recession. We find average multipliers that are similar to those that have been reported for the decades preceding the crisis, but this masks substantial heterogeneity. First, average cumulative multipliers were around 2 in the impact quarter, but declined to less than 1 after one year. Second, implied relative multipliers ranged between 0 and more than 4 across states at particular points in time, as well as for the same state at different moments within the sample period depending on the individual state's stance of the business cycle, household indebtedness and the interaction of both conditions. Finally, we provide evidence that, controlling for total expenditures, a mere redistribution of government spending across states did also had a significant infl uence on the aggregate U.S. economy due to cross-state heterogeneity of the effects.

Keywords: fiscal multiplier; household debt; Great Recession; regional redistribution (search for similar items in EconPapers)
JEL-codes: C23 E32 E44 E62 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2017-04
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Heterogeneous Government Spending Multipliers in the Era Surrounding the Great Recession (2020)
Working Paper: Heterogeneous Government Spending Multipliers in the Era Surrounding the Great Recession (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:17/941

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