Arbeitspapier
The government spending multiplier at the zero lower bound: Evidence from the United States
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.
- Language
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Englisch
- Bibliographic citation
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Series: ECON WPS ; No. 04/2020
- 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
Macroeconomics: Consumption; Saving; Wealth
Business Fluctuations; Cycles
Monetary Policy
Fiscal Policy
National Government Expenditures and Related Policies: General
- Subject
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Interacted VAR
Fiscal Policy
Government Spending
Zero Interest Rate Lower Bound
- Event
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Geistige Schöpfung
- (who)
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Di Serio, Mario
Fragetta, Matteo
Gasteiger, Emanuel
- Event
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Veröffentlichung
- (who)
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Vienna University of Technology, Institute of Statistics and Mathematical Methods in Economics, Research Group Economics
- (where)
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Vienna
- (when)
-
2020
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
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
- Vienna University of Technology, Institute of Statistics and Mathematical Methods in Economics, Research Group Economics
Time of origin
- 2020
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