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Estimating fiscal multipliers: evidence from a nonlinear world

Author

Listed:
  • Giovanni Caggiano

    (University of Padova)

  • Efrem Castelnuovo

    (University of Padova)

  • Valentina Colombo

    (University of Padova)

  • Gabriela Nodari

    (University of Verona)

Abstract

We estimate nonlinear VARs to assess to what extent fiscal spending multipliers are countercyclical in the United States. We deal with the issue of nonfundamentalness 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 of future dynamics of public spending. Results based on generalized impulse responses suggest that fiscal spending multipliers in recessions are greater than one, but not statistically larger than in expansions. However, nonlinearities arise when focusing on deep recessions vs. strong expansionary periods.

Suggested Citation

  • Giovanni Caggiano & Efrem Castelnuovo & Valentina Colombo & Gabriela Nodari, 2014. "Estimating fiscal multipliers: evidence from a nonlinear world," "Marco Fanno" Working Papers 0179, Dipartimento di Scienze Economiche "Marco Fanno".
    • Handle: RePEc:pad:wpaper:0179
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    More about this item

    Keywords

    Fiscal news; Fiscal foresight; Fiscal spending multipliers; Smooth Transition Vector-AutoRegressions.;
    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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