Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105990
Authors: 
Gechert, Sebastian
Mentges, Rafael
Year of Publication: 
2013
Series/Report no.: 
IMK Working Paper 124
Abstract: 
We show that fiscal multiplier estimations may be biased by movements in asset and credit markets, as they facilitate spurious correlations of changes in cyclically adjusted revenues and spending with GDP growth via wrong identifications and an omitted variable bias, thus overstating episodes of expansionary consolidations and downplaying contractionary consolidations. When controlling for asset and credit market movements in otherwise standard approaches to identification, we find multipliers to increase on average by 0.3 to 0.6 units. Consolidations are thus more likely to be contractionary and more harmful to growth than expected by some strands of the existing literature.
Subjects: 
multiplier effects
fiscal policy
asset markets
credit markets
JEL: 
C22
E62
H30
Document Type: 
Working Paper

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