Fiscal multipliers in good times and bad times
Source of Publication
Journal of Macroeconomics
© 2015 The Authors. This paper estimates the magnitudes of government spending and tax multipliers within a regime-switching framework for the U.S. economy during the period 1949:1-2006:4. Our results show that the magnitudes of spending multipliers are larger during periods of low economic activity, while the magnitudes of tax multipliers are larger during periods of high economic activity. We also show that the magnitudes of fiscal multipliers got smaller for episodes of low growth, while they got larger for episodes of high growth in the post 1980 period. Analyzing the effects of government spending and taxes on consumption and investment spending indicates that the magnitude of the effects of fiscal shocks on consumption and investment is very small.
Peren Arin, K.; Koray, Faik; and Spagnolo, Nicola, "Fiscal multipliers in good times and bad times" (2015). Scopus Indexed Articles. 1772.