Withering Government Spending Multipliers

New Keynesian versus old Keynesian government spending multipliers

Renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy. Because of modelling uncertainty, it is essential that policy evaluations be robust to alternative assumptions. We find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust. Government spending multipliers in an alternative empirically estimated ...

Cartel Stability, Mark-Up Cyclicality and Government Spending Multipliers

Mark-up cyclical behaviour is relevant in determining the size of government spending multiplier on output. While theoretical literature priviliged the counteryclical hypothesis, empirical evidence is far from being conclusive. Based on seminal Rotemberg and Saloner (1986) contribution, we build a theoretical framework based on Bertrand duopoly, stochastic demand and product di¤erentiation, whe...

Government Spending Multipliers under Zero Lower Bound: Evidence from Japan∗

Using a rich data set on government spending forecasts, we estimate the effects of unexpected government spending both when the nominal interest rate is near zero lower bound (ZLB) and outside of ZLB period in Japan. The output multiplier is 1.5 on impact in the ZLB period while it is 0.7 outside of the ZLB period. We argue that this result is not driven by the amount of slack in the economy. W...

Government Spending Multipliers under the Zero Lower Bound: Evidence from Japan

Using a rich data set on government spending forecasts, we estimate the effects of unexpected government spending both when the nominal interest rate is near zero lower bound (ZLB) and outside of the ZLB period in Japan. The output multiplier is 1.5 on impact in the ZLB period, while it is 0.7 outside of the ZLB period. We estimate that the government spending shocks increase both private consu...

Government Spending and Growth