Macroeconomic Effects of Government Spending Shocks: New Narrative Evidence from Canada

Syed Hussain and Lin Liu

Working Papers from University of Liverpool, Department of Economics

Abstract: This paper examines the macroeconomic effects of government spending shocks in Canada for the period of 1949 - 2012. We construct a novel measure of news about exogenous government spending changes identified through the narrative approach. We use government documents, mostly the budget speech, to identify the size, timing, and principal motivation for all planned major federal government spending changes. To achieve identification, we consider those changes that are unrelated to the contemporaneous movements in the economy. The implied government spending multiplier estimates using our exogenous government spending news series are between 0.84 and 1.55.

Keywords: Government Spending Shocks; Government Spending Multiplier; Narrative Accounts; Canada (search for similar items in EconPapers)
JEL-codes: E62 H3 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:liv:livedp:202201

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