Government Spending and Consumption at the Zero Lower Bound: Evidence from Household Retail Purchase Data

Marios Karabarbounis, Marianna Kudlyak, M. Saif Mehkari () and Bill Dupor

No 1463, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: This paper uses cross-regional variation in the fiscal stimulus of 2009-2013 to analyze the effects of government spending on household-level consumption when the nominal interest rate is zero. The key novelty is the construction of a comprehensive measure of local consumption expenditures using (i) household-level retail purchase data using Nielsen Homescan Consumer Panel and (ii) state-level consumption data from the BEA. Most of our specifications point toward a significantly positive consumption multiplier around 0.25 for non-durable consumption. We translate our regional multiplier into an aggregate multiplier using a heterogeneous agents, New Keynesian model with multiple regions and input linkages.

Date: 2016
New Economics Papers: this item is included in nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:1463

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