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A Second Thought on Estimating Expansionary Fiscal Policy Effects in the U.S

Bijie Jia ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper revisits mixed findings of the expansionary fiscal spending effect in the U.S. An array of standard Vector-Autoregressive (VAR) models have been implemented to capture inconsistent effects of the fiscal expansion across studies. Findings in this paper consistently reveal that, first, government expenditures often generate less positive influence than government purchases; second, leaving aside the state and local government spending, federal government purchases alone have a very limited influence on the economy; third, 2007 recession significantly weakened the effectiveness of fiscal expansionary policy thereafter. Following these findings, this paper questions the validity of using government purchases alone to conclude the comprehensive effect of fiscal expansion.

Keywords: E21; E32; E62; H30; H50. (search for similar items in EconPapers)
JEL-codes: E21 E32 E62 H30 H50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-pbe
Date: 2017-05, Revised 2018-09
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