Local fiscal multipliers of different government spending categories

Thomas Gemert (), Lenard Lieb and Tania Treibich
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Thomas Gemert: Maastricht University

Empirical Economics, 2022, vol. 63, issue 5, No 8, 2575 pages

Abstract: Abstract This paper compares multipliers of different categories of US federal government spending, and in doing so provides a new insight as to why fiscal multipliers may differ across countries and time. We identify exogenous federal government spending shocks at the state level for defense and non-defense spending. Using a projection-based approach, we estimate the cumulative multiplier due to shocks in either of these spending categories. Our results indicate that defense spending yields lower multipliers than non-defense spending. Thus, focusing only on defense spending may result in underestimating the multiplier for government spending.

Keywords: Fiscal policy; Government spending; Local fiscal multiplier (search for similar items in EconPapers)
JEL-codes: E62 H30 H50 H70 H71 H72 H77 N42 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s00181-022-02217-5

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