Working Paper: NBER ID: w25531
Authors: Valerie A. Ramey
Abstract: This paper takes stock of what we have learned from the “Renaissance” in fiscal research in the ten years since the financial crisis. I first summarize the new innovations in methodology and discuss the various strengths and weaknesses of the main approaches. Reviewing the estimates, I come to the surprising conclusion that the bulk of the estimates for average spending and tax change multipliers lie in a fairly narrow range, 0.6 to 1 for spending multipliers and -2 to -3 for tax change multipliers. However, I identify economic circumstances in which multipliers lie outside those ranges. I conclude by reviewing the debate on whether multipliers were higher on the stimulus spending in the U.S. and the fiscal consolidations in Europe.
Keywords: No keywords provided
JEL Codes: E62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government spending (H59) | GDP (E20) |
| Tax change (H26) | GDP (E20) |
| Monetary accommodation (E52) | Government spending multiplier (E62) |
| Government spending multiplier (E62) | Private activity (H42) |
| Fiscal stimulus in the U.S. (E62) | Higher multipliers (C39) |
| Fiscal consolidations in Europe (E62) | Higher multipliers (C39) |