Working Paper: NBER ID: w18578
Authors: Alan J. Auerbach; Yuriy Gorodnichenko
Abstract: In this paper, we estimate the cross-country spillover effects of government purchases on output for a large number of OECD countries. Following the methodology in Auerbach and Gorodnichenko (2012a, b), we allow these multipliers to vary smoothly according to the state of the economy and use real-time forecast data to purge policy innovations of their predictable components. We also consider the responses of other key macroeconomic variables. Our findings suggest that cross-country spillovers have an important impact, and also confirm those of our earlier papers that fiscal shocks have a larger impact when the affected country is in recession.
Keywords: No keywords provided
JEL Codes: E32; E62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Controlling for unobserved heterogeneity (C21) | Enhancing robustness of causal claims (C32) |
| Increased government spending in one country during a recession (E62) | Higher output in another country (F29) |
| Fiscal shocks (H39) | Output multipliers in recessions (E19) |
| Economic conditions of source and recipient countries (F24) | Impact of fiscal spillovers (E62) |