Estimating Fiscal Multipliers: News from a Nonlinear World

Giovanni Caggiano, Efrem Castelnuovo, Valentina Colombo and Gabriela Nodari

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: We estimate nonlinear VARs to assess to what extent fiscal spending multipliers are countercyclical in the United States. We deal with the issue of non-fundamentalness due to fiscal foresight by appealing to sums of revisions of expectations of fiscal expenditures. This measure of anticipated fiscal shocks is shown to carry valuable information about future dynamics of public spending. Results based on generalized impulse responses suggest that fiscal spending multipliers in recessions are greater than one, but not statistically larger than those in expansions. However, nonlinearities arise when focusing on “extreme” events, i.e. deep recessions vs. strong expansionary periods.

Keywords: Fiscal news; fiscal foresight; fiscal spending multiplier; Smooth Transition Vector-AutoRegressions; extreme events (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 (search for similar items in EconPapers)
Pages: 70pp
Date: 2014-12
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Estimating Fiscal Multipliers: News From A Non‐linear World (2015)
Working Paper: Estimating Fiscal Multipliers:News From a Nonlinear World (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2014n26

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