Clearing Up the Fiscal Multiplier Morass
Eric Leeper (),
Nora Traum () and
No 17444, NBER Working Papers from National Bureau of Economic Research, Inc
Bayesian prior predictive analysis of five nested DSGE models suggests that model specifications and prior distributions tightly circumscribe the range of possible government spending multipliers. Multipliers are decomposed into wealth and substitution effects, yielding uniform comparisons across models. By constraining the multiplier to tight ranges, model and prior selections bias results, revealing less about fiscal effects in data than about the lenses through which researchers choose to interpret data. When monetary policy actively targets inflation, output multipliers can exceed one, but investment multipliers are likely to be negative. Passive monetary policy produces consistently strong multipliers for output, consumption, and investment.
JEL-codes: C11 E62 E63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (59) Track citations by RSS feed
Published as Eric M. Leeper & Nora Traum & Todd B. Walker, 2017. "Clearing Up the Fiscal Multiplier Morass," American Economic Review, vol 107(8), pages 2409-2454.
Downloads: (external link)
Journal Article: Clearing Up the Fiscal Multiplier Morass (2017)
Working Paper: Clearing Up the Fiscal Multiplier Morass (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:17444
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().