Nonlinear effects of government spending shocks in the USA: Evidence from state‐level data

Haroon Mumtaz and Laura Sunder‐Plassmann
Authors registered in the RePEc Author Service: Laura Sunder-Plassmann

Journal of Applied Econometrics, 2021, vol. 36, issue 1, 86-97

Abstract: This paper uses state‐level data to estimate the effect of government spending shocks during expansions and recessions. By employing a mixed‐frequency framework, we are able to include a long span of annual state‐level government spending data in our nonlinear quarterly panel VAR model. We find evidence that for the average state the fiscal multiplier is larger during recessions. However, there is substantial heterogeneity across the cross‐section. The degree of nonlinearity in the effect of spending shocks is larger in states that are subject to a higher degree of financial frictions. In contrast, states with a prevalence of manufacturing, mining and agricultural industries tend to have multipliers that are more similar across business cycle phases.

Date: 2021
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Citations: View citations in EconPapers (12)

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https://doi.org/10.1002/jae.2800

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Working Paper: Non-linear effects of government spending shocks in the US. Evidence from state-level data (2017)
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