Fiscal Adjustments and Debt-Dependent Multipliers: Evidence from the U.S. Time Series
Yasuharu Iwata and
No HIAS-E-103, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University
Using sign restrictions within a time-varying parameter vector autoregressive (TVP-VAR) framework, we provide new time-series evidence of debt-dependent multipliers for the U.S. while simultaneously obtaining larger multipliers during recessions in line with previous studies. The Ricardian channel where households reduce consumption expecting larger scal adjustments is shown to be relevant for the debt-dependent multipliers. The TVP-VAR framework also allows us to observe changes in the magnitude of scal adjustments. We nd that the larger scal adjustments in the presence of rising indebtedness is the major driving force behind the smaller multipliers in the post-Volcker period rather than debt accumulation itself.
Keywords: Bayesian VARs; Time-varying parameters; Fiscal multipliers; Fiscal policy (search for similar items in EconPapers)
JEL-codes: E32 E62 H60 (search for similar items in EconPapers)
Pages: 37 p.
New Economics Papers: this item is included in nep-mac
Note: December 22, 2020
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hiasdp:hias-e-103
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