Measuring the Output Responses to Fiscal Policy

Alan Auerbach and Yuriy Gorodnichenko

American Economic Journal: Economic Policy, 2012, vol. 4, issue 2, 1-27

Abstract: A key issue in current research and policy is the size of fiscal multipliers when the economy is in recession. We provide three insights. First, using regime-switching models, we find large differences in the size of spending multipliers in recessions and expansions with fiscal policy being considerably more effective in recessions than in expansions. Second, we estimate multipliers for more disaggregate spending variables which behave differently relative to aggregate fiscal policy shocks, with military spending having the largest multiplier. Third, we show that controlling for predictable components of fiscal shocks tends to increase the size of the multipliers in recessions. (JEL C32, E62, H20, H62, H63)

JEL-codes: C32 E62 H20 H62 H63 (search for similar items in EconPapers)
Date: 2012
Note: DOI: 10.1257/pol.4.2.1
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Citations: View citations in EconPapers (1537)

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Related works:
Chapter: Measuring the Output Responses to Fiscal Policy (2010)
Working Paper: Measuring the Output Responses to Fiscal Policy (2010)
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