Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/216825
Authors: 
Di Serio, Mario
Fragetta, Matteo
Gasteiger, Emanuel
Year of Publication: 
2020
Series/Report no.: 
ECON WPS No. 04/2020
Abstract: 
We estimate state-dependent government spending multipliers for the United States. We use a Factor-Augmented Interacted Vector Autoregression (FAIVAR) model. This allows us to capture the time-varying monetary policy characteristics including the recent zero interest rate lower bound (ZLB) state, to account for the state of the business cycle, and to address the limited information problem typically inherent in VARs. We identify government spending shocks by sign restrictions and use a government spending growth forecast series to account for the effects of anticipated fiscal policy. In our baseline specification, we find that government spending multipliers in a recession range from 3:56 to 3:79 at the ZLB. Away from the ZLB, multipliers in recessions range from 2:31 to 3:05. Several robustness analyses confirm that multipliers are higher, when the interest rate is lower and that multipliers in recessions exceed multipliers in expansions. Our results are consistent with theories that predict larger multipliers at the ZLB.
Subjects: 
Interacted VAR
Fiscal Policy
Government Spending
Zero Interest Rate Lower Bound
JEL: 
C32
E21
E32
E52
E62
H50
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.