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On the Measurement of the Government Spending Multiplier in the United States An ARDL Cointegration Approach

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  • Ebadi, Esmaeil

Abstract

This paper applies annual data from 1962 to 2011 to investigate the long run relationship between government spending and Gross Domestic Product (GDP) based on Barro’s (1990) government spending model. The common approach only considers defense government spending to estimate the multiplier to overcome the identification problem and endogeneity in isolating the effect of changes in government spending on GDP. I use the Autoregressive Distributed Lag (ARDL) approach to cointegration, which works despite having endogenous regressors to estimate the spending multiplier. The results confirm that government spending can be treated as a ‘long-run forcing’ variable for the explanation of real GDP and the long-run multiplier is found to be 1.94.

Suggested Citation

  • Ebadi, Esmaeil, 2018. "On the Measurement of the Government Spending Multiplier in the United States An ARDL Cointegration Approach," MPRA Paper 85459, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:85459
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    References listed on IDEAS

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    11. Ekaterini Panopoulou & Nikitas Pittis, 2004. "A comparison of autoregressive distributed lag and dynamic OLS cointegration estimators in the case of a serially correlated cointegration error," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 585-617, December.
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    Cited by:

    1. Ebadi, Esmaeil, 2018. "On the Effect of Government Spending on Money Demand in the United States: An ARDL Cointegration Approach," MPRA Paper 86399, University Library of Munich, Germany.

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    More about this item

    Keywords

    Government Spending; Spending Multiplier; Cointegration; ARDL Approach;
    All these keywords.

    JEL classification:

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

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