Tax multipliers and monetary policy: Evidence from a threshold model

Paul M. Jones and Eric Olson ()

Economics Letters, 2014, vol. 122, issue 2, 116-118

Abstract: Romer and Romer (2010) use the narrative record to generate a time series of exogenous shocks to fiscal policy. They report a tax multiplier of 3.0. We extend their analysis and allow for nonlinearities between their shocks and the effects on output by estimating a threshold regression model. Using Hansen’s (1997) procedure, we find the best fitting threshold is changes in the federal fund rate with a delay of two quarters. Moreover, we find that the tax multiplier is approximately 4.3 if accompanied by an accommodative monetary policy and approximately 1.2 under tight monetary policy.

Keywords: Threshold model; Tax multiplier; Monetary policy (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176513004886
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:122:y:2014:i:2:p:116-118

DOI: 10.1016/j.econlet.2013.11.001

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().