Working Paper: NBER ID: w18769
Authors: Michael T. Owyang; Valerie A. Ramey; Sarah Zubairy
Abstract: A key question that has arisen during recent debates is whether government spending multipliers are larger during times when resources are idle. This paper seeks to shed light on this question by analyzing new quarterly historical data covering multiple large wars and depressions in the U.S. and Canada. Using an extension of Ramey's (2011) military news series and Jordà 's (2005) method for estimating impulse responses, we find no evidence that multipliers are greater during periods of high unemployment in the U.S. In every case, the estimated multipliers are below unity. We do find some evidence of higher multipliers during periods of slack in Canada, with some multipliers above unity.
Keywords: government spending multipliers; economic slack; historical data
JEL Codes: E62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Economic conditions (E66) | government spending multipliers (E62) |
| Economic slack (E24) | government spending multipliers (E62) |
| High unemployment (J64) | government spending multipliers (E62) |