Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96915
Authors: 
Yang, Weonho
Fidrmuc, Jan
Ghosh, Sugata
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4689
Abstract: 
Ramey (2011a) and others argue that increases in government spending associated with wars and military build-ups constitute a good instrument for measuring the macroeconomic effects of fiscal shocks. We argue that this instrument has two important drawbacks: the composition of government spending during military build-ups in the US differs substantially from general government expenditure, and increases in military spending tend to crowd out federal non-defense spending as well as spending by state and local governments. These weaknesses help to explain why fiscal multipliers estimated with military build-ups tend to be smaller than those estimated using other approaches.
Subjects: 
fiscal shocks
fiscal multiplier
military build-ups
US economy
JEL: 
E13
E22
E62
Document Type: 
Working Paper

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