Clearing Up the Fiscal Multiplier Morass: Prior and Posterior Analysis

Eric Leeper, Nora Traum and Todd Walker

No 21433, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: C11 E62 E63 (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-dge and nep-mac
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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.

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