Spending Multipliers and the Party in Power: Evidence from United States Political Cycles

Francesco Morelli ()
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Francesco Morelli: Link Campus University

No 617, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: I analyze U.S. government spending multipliers conditional on the political cycle. The results indicate that, in many specifications, multipliers are positive during second terms and negative during first terms. Moreover, across all formulations, multipliers are positive under Democratic administrations and negative under Republican administrations. These findings are robust to alternative controls and model specifications, and they underscore the pivotal role of political expectations in shaping the sign and magnitude of fiscal spending multipliers.

Keywords: Spending multipliers; State dependence; Political cycle; Partisan thoery; Local projections. (search for similar items in EconPapers)
JEL-codes: C32 D72 E32 E62 H50 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2025-11-17, Revised 2025-11-17
New Economics Papers: this item is included in nep-pol
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