Arbeitspapier
The Euro Area Government Spending Multiplier in Demand- and Supply-Driven Recessions
We estimate government spending multipliers in demand- and supply-driven recessions for the Euro Area. Multipliers in a moderately demand-driven recession are 2-3 times larger than in a moderately supply-driven recession, with the difference between multipliers being non-zero with very high probability. More generally, multipliers are inversely correlated with the deviation of inflation from its trend, implying that the more demand-driven a recession, the higher the multiplier. Median multipliers range from -0.5 in supply-driven recessions to about 2 in demand-driven recessions. The econometric approach leverages a factor-augmented interacted vector-autoregression model purified of expectations (FAIPVAR-X). The model captures the time-varying state of the business-cycle including strongly and moderately demand- and supply-driven recessions, by taking the whole distribution of inflation deviations from trend into account.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 9678
- Classification
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Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
Multiple or Simultaneous Equation Models: Classification Methods; Cluster Analysis; Principal Components; Factor Models
Business Fluctuations; Cycles
Fiscal Policy
- Subject
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fiscal multiplier
business cycle
interacted panel VAR
factor models
Euro Area
- Event
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Geistige Schöpfung
- (who)
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Di Serio, Mario
Fragetta, Matteo
Gasteiger, Emanuel
Melina, Giovanni
- Event
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Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
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2022
- Handle
- Last update
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10.03.2025, 11:45 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Di Serio, Mario
- Fragetta, Matteo
- Gasteiger, Emanuel
- Melina, Giovanni
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2022
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