What Determines Government Spending Multipliers?

Giancarlo Corsetti, Müller, Gernot and Andre Meier
Authors registered in the RePEc Author Service: Gernot J. Müller

No 9010, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies how the effects of government spending vary with the economic environment. Using a panel of OECD countries, we identify fiscal shocks as residuals from an estimated spending rule and trace their macroeconomic impact under different conditions regarding the exchange rate regime, public indebtedness, and health of the financial system. The unconditional responses to a positive spending shock broadly confirm earlier findings. However, conditional responses differ systematically across exchange rate regimes, as real appreciation and external deficits occur mainly under currency pegs. We also find output and consumption multipliers to be unusually high during times of financial crisis.

Keywords: Exchange rate regime; Financial crisis; Fiscal policy; Fiscal rules; Government spending; Multiplier; Public finances (search for similar items in EconPapers)
JEL-codes: E62 E63 F41 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (332)

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Related works:
Journal Article: What determines government spending multipliers? (2012)
Journal Article: What determines government spending multipliers? (2012)
Working Paper: What Determines Government Spending Multipliers? (2012)
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