Clearing Up the Fiscal Multiplier Morass
Eric M. Leeper,
Nora Traum () and
Todd B. Walker
American Economic Review, 2017, vol. 107, issue 8, 2409-54
We quantify government spending multipliers in US data using Bayesian prior and posterior analysis of a monetary model with fiscal details and two distinct monetary-fiscal policy regimes. The combination of model specification, observable data, and relatively diffuse priors for some parameters lands posterior estimates in regions of the parameter space that yield fresh perspectives on the transmission mechanisms that underlie government spending multipliers. Short-run output multipliers are comparable across regimes—posterior means around 1.3 on impact—but much larger after 10 years under passive money/active fiscal than under active money/passive fiscal—90 percent credible sets of [1.5, 1.9] versus [0.1, 0.4] in present value, when estimated from 1955 to 2016.
JEL-codes: E52 E62 E63 H50 (search for similar items in EconPapers)
Note: DOI: 10.1257/aer.20111196
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Working Paper: Clearing Up the Fiscal Multiplier Morass (2015)
Working Paper: Clearing Up the Fiscal Multiplier Morass (2011)
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