Estimating Fiscal Multipliers: News From A Non-linear World

Valentina Colombo, Giovanni Caggiano, Efrem Castelnuovo, Gabriela Nodari

Research output: Contribution to journalArticle

59 Citations (Scopus)

Abstract

We estimate non-linear VARs to assess to what extent fiscal spending multipliers are countercyclical in the US. We deal with the issue of non-fundamentalness due to fiscal foresight by appealing to sums of revisions of expectations of fiscal expenditures. This measure of anticipated fiscal shocks is shown to carry valuable information about future dynamics of public spending. Results based on generalised impulse responses suggest that fiscal spending multipliers in recessions are greater than one, but not statistically larger than those in expansions. However, non-linearities arise when focusing on 'extreme' events, that is, deep recessions versus strong expansionary periods.
Original languageEnglish
Pages (from-to)746-776
Number of pages31
JournalEconomic Journal
Volume125
DOIs
Publication statusPublished - 2015

Keywords

  • Fiscal Policy
  • Multipliers

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