Different specifications and implications of the supermultiplier model

José A. Pérez-Montiel and Andreu Sansó

Structural Change and Economic Dynamics, 2025, vol. 74, issue C, 963-969

Abstract: We analyze, compare, and discuss two distinct econometric specifications of the supermultiplier model. Specifically, we contrast the empirical strategy that examines the relationship between output (yt) and autonomous demand (zt) with the specification that focuses on the relationship between induced demand (xt) and zt. Although both specifications are theoretically valid from a macroeconomic standpoint, we use econometric theory to show that they may lead to different conclusions regarding cointegration and causality. This paper challenges the findings of existing empirical research based on the yt–zt specification, which should be interpreted with caution, particularly those suggesting unidirectional Granger causality from autonomous demand to output.

Keywords: Supermultiplier model; Autonomous demand; Induced demand; Cointegration; Granger causality (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:74:y:2025:i:c:p:963-969

DOI: 10.1016/j.strueco.2025.06.012

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