Government spending multipliers: Is there a difference between government consumption and investment purchases?

Alfred A. Haug and Anna Sznajderska

Journal of Macroeconomics, 2024, vol. 79, issue C

Abstract: This paper empirically studies the U.S. multiplier effects of government investment, government consumption and total government purchases on output. We explore dependencies of the multipliers on states of the economy, measured in different ways. Using local projections with instrumental variables, we find that a model without state-dependencies and using total government spending (instead of its components) provides the best fit to post-WWII data. These results are robust to various alternative specifications. We account for the COVID-19 period with a pandemic stringency index and for monetary policy shocks with a shadow interest rate. The government spending multiplier is approximately 0.5.

Keywords: Government investment and government consumption multipliers; COVID-19; Local projections (search for similar items in EconPapers)
JEL-codes: E62 E63 H50 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:79:y:2024:i:c:s0164070423000848

DOI: 10.1016/j.jmacro.2023.103584

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