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Measuring the fiscal multiplier when plans take time to implement

Author

Listed:
  • Kevin Lee
  • James Morley
  • Kian Ong
  • Kalvinder Shields

Abstract

The paper describes how to measure the fiscal multiplier using budget statements on planned government spending in the current and following years alongside the data on actual outcomes. The multiplier effects can be decomposed to distinguish the effects of ‘policy reactions’ versus ‘policy initiatives’, with the latter shown to be substantially larger than the former in a study of annual US data over 1957-2016. It is noted that the fiscal initiatives undertaken following the events of 2007/8 played an important role in mitigating the recessionary effects of the global financial crisis in the US.

Suggested Citation

  • Kevin Lee & James Morley & Kian Ong & Kalvinder Shields, 2018. "Measuring the fiscal multiplier when plans take time to implement," Discussion Papers 2018/10, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    • Handle: RePEc:not:notcfc:18/10
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    Cited by:

    1. Kevin Lee & James Morley & Kalvinder Shields & Madeleine Sui-Lay Tan, 2018. "The Australian real-time fiscal database: An overview and an illustration of its use in analysing planned and realised fiscal policies," Discussion Papers 2018/11, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).

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    More about this item

    Keywords

    Government spending plans; real-time data; fiscal multiplier;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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