|COOKIES: By using this website you agree that we can place Google Analytics Cookies on your device for performance monitoring.|
What determines government spending multipliers?
If you have a question about this talk, please contact Rachel Marston.
Theory predicts that the effect of fiscal expansion varies with the economic environment, notably the monetary and exchange rate regime, the state of public finances, and the health of the financial system. Using a panel of OECD countries, we evaluate the issue empirically, focusing on the macroeconomic effects of government consumption. Fiscal shocks are identified as residuals from an estimated government spending rule. These shocks are then interacted with conditioning variables in order to explain macroeconomic outcomes across a range of economic environments. Without such interactions, the unconditional responses to a spending shock are in line with earlier results, featuring a positive, if relatively small output multiplier, no significant movement in consumption, and a fall in investment and the trade balance. Yet these average results mask important differences across environments. In particular, the responses of the real exchange rate and net exports vary systematically across exchange rate regimes, with real appreciation and external deficits emerging mainly under a currency peg. Output and consumption multipliers, in turn, become quite sizeable during times of financial crisis.
This talk is part of the Cambridge Finance Workshop Series series.
This talk is included in these lists:
Note that ex-directory lists are not shown.
Other listsCambridge University Amnesty International DIAL seminars Leadership in the Emerging Markets
Other talksSouthern Namibia Question writing GSI Research Seminar Series - When and how will human society collapse? Forth Demain Discussion The Signorini problem for the heat equation: regularity of the solution and of the free boundary Global Burden of Disease: from Global to Local