On the Size of the Government Spending Multiplier in the Euro Area

Patrick Fève and Jean-Guillaume Sahuc

No 776, IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse

Abstract: This article addresses the existence of a wide range of estimated government spending multipliers in a dynamic stochastic general equilibrium model of the euro area. Our estimation results and counterfactual exercises provide evidence that omitting the interactions of key ingredients at the estimation stage (such as Edgeworth complementarity/subtitutability between private consumption and government expenditures, endogenous government spending policy and general time nonseparable preferences) paves the way for potentially large biases. We argue that uncertainty on the quantitative assessments of fiscal programmes could partly originate from these biases.

Keywords: Government spending multiplier; DSGE models; Estimation bias; Euro area (search for similar items in EconPapers)
JEL-codes: C32 E32 E62 (search for similar items in EconPapers)
Date: 2013-04, Revised 2013-11
New Economics Papers: this item is included in nep-dge and nep-eec
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: On the size of the government spending multiplier in the euro area (2015)
Working Paper: On the Size of the Government Spending Multiplier in the Euro Area (2015)
Working Paper: On the Size of the Government Spending Multiplier in the Euro Area (2015)
Working Paper: On the Size of the Government Spending Multiplier in the Euro Area (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ide:wpaper:27173

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