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What Do British Historical Data Tell Us About Government Spending Multipliers?

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  • Shingo Watanabe

Abstract

British data from the early 1700s through World War I reflect the results of numerous high‐quality natural experiments of government spending. Britain frequently participated in wars, increasing military spending massively. Wartime distortions were relatively limited because the government generally adopted tax smoothing policy and rarely implemented interventions. Government spending multiplier estimates are low or negative and significantly below unity. This paper finds no evidence that the multiplier was higher in the slack state than in the normal state. (JEL E32, E62)

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  • Shingo Watanabe, 2019. "What Do British Historical Data Tell Us About Government Spending Multipliers?," Economic Inquiry, Western Economic Association International, vol. 57(2), pages 1141-1162, April.
    • Handle: RePEc:bla:ecinqu:v:57:y:2019:i:2:p:1141-1162
    DOI: 10.1111/ecin.12746
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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