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- Title
State-dependent effects of fiscal policy.
- Authors
Fazzari, Steven M.; Morley, James; Panovska, Irina
- Abstract
We investigate the effects of government spending on US output with a threshold structural vector autoregressive model. We consider Bayesian model comparison and generalized impulse response analysis to test for nonlinearities in the responses of output to government spending. Our empirical findings support state-dependent effects of fiscal policy, with the government spending multiplier larger and more persistent whenever there is considerable economic slack. Based on capacity utilization as the preferred threshold variable, the estimated multiplier is large (1.6) for a low-utilization regime that accounts for more than half of the sample observations from 1967 to 2012 according to the estimated threshold level.
- Subjects
FISCAL policy; PUBLIC spending; BAYESIAN analysis; NONLINEAR analysis; EMPIRICAL research; AUTOREGRESSION (Statistics)
- Publication
Studies in Nonlinear Dynamics & Econometrics, 2015, Vol 19, Issue 3, p285
- ISSN
1081-1826
- Publication type
Article
- DOI
10.1515/snde-2014-0022