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Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data

2017; University of Chicago Press; Volume: 126; Issue: 2 Linguagem: Inglês

10.1086/696277

1537-534X

Valerie Ramey, Sarah Zubairy,

Fiscal Policies and Political Economy

We investigate whether US government spending multipliers are higher during periods of economic slack or when interest rates are near the zero lower bound. Using new quarterly historical US data covering multiple large wars and deep recessions, we estimate multipliers that are below unity irrespective of the amount of slack in the economy. These results are robust to two leading identification schemes, two different estimation methodologies, and many alternative specifications. In contrast, the results are more mixed for the zero lower bound state, with a few specifications implying multipliers as high as 1.5.