Clearing Up the Fiscal Multiplier Morass

Eric Leeper, Nora Traum and Todd Walker

No 2015-013, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: We use Bayesian prior and posterior analysis of a monetary DSGE model, extended to include fiscal details and two distinct monetary-fiscal policy regimes, to quantify government spending multipliers in U.S. data. The combination of model specification, observable data, and relatively diffuse priors for some parameters lands posterior estimates in regions of the parameter space that yield fresh perspectives on the transmission mechanisms that underlie government spending multipliers. Posterior mean estimates of short-run output multipliers are comparable across regimes—about 1.4 on impact—but much larger after 10 years under passive money/active fiscal than under active money/passive fiscal—means of 1.9 versus 0.7 in present value.

Keywords: government spending; monetary-fiscal interactions; prior predictive analysis; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: C11 E62 E63 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2015-07
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49)

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Related works:
Journal Article: Clearing Up the Fiscal Multiplier Morass (2017)
Working Paper: Clearing Up the Fiscal Multiplier Morass (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:inu:caeprp:2015013

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