Time-varying government spending multipliers in the UK

Christian Glocker, Giulia Sestieri and Pascal Towbin

Journal of Macroeconomics, 2019, vol. 60, issue C, 180-197

Abstract: We study government spending multipliers of the UK economy using a time-varying parameter factor augmented vector autoregressive model (TVP-FAVAR) over the period 1966:Q1–2015:Q4. We show that government spending multipliers vary over time and that most of the variation is cyclical: multipliers for GDP are typically above one in recessions and below one in expansions. Regarding the drivers of the cyclical variation, our results are consistent with theories emphasizing the role of financial frictions and economic slack. We find no evidence that multipliers are larger at the zero lower bound. Structural factors seem to play a lesser role and multipliers do not exhibit a clear trend. We conclude that fiscal policy recommendations should take into account the position of the economy in the cycle in assessing their effectiveness and that the impact of government spending shocks is limited in the UK in non-recessionary periods.

Keywords: Government spending shocks; Fiscal transmission mechanism; Time-varying parameter models; Business cycle (search for similar items in EconPapers)
JEL-codes: C32 E62 H30 H50 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0164070418301642
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:jmacro:v:60:y:2019:i:c:p:180-197

DOI: 10.1016/j.jmacro.2019.02.003

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().