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- Title
DESPERATE TIMES CALL FOR DESPERATE MEASURES: GOVERNMENT SPENDING MULTIPLIERS IN HARD TIMES.
- Authors
Lee, Sokbae; Liao, Yuan; Seo, Myung Hwan; Shin, Youngki
- Abstract
We investigate state‐dependent effects of fiscal multipliers and allow for endogenous sample splitting to determine whether the U.S. economy is in a slack state. When the endogenized slack state is estimated as the period of the unemployment rate higher than about 12%, the estimated cumulative multipliers are significantly larger during slack periods than nonslack periods and are above unity. We also examine the possibility of time‐varying regimes of slackness and find that our empirical results are robust under a more flexible framework. Our estimation results point out the importance of the heterogenous effects of fiscal policy and shed light on the prospect of fiscal policy in response to economic shocks from the current COVID‐19 pandemic.
- Subjects
UNITED States; ANALOG multipliers; EMPLOYMENT statistics; FISCAL policy; ECONOMICS; COVID-19
- Publication
Economic Inquiry, 2020, Vol 58, Issue 4, p1949
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/ecin.12919