Working Paper: NBER ID: w31015
Authors: Nadav Ben Zeev; Valerie A. Ramey; Sarah Zubairy
Abstract: We analyze whether government spending multipliers differ by the sign of the shock. Using aggregate historical U.S. data, we apply Ben Zeev’s (2020) nonlinear diagnostic tests and find evidence of nonlinearities in the impulse response functions of both government spending and GDP. We then extend Ramey and Zubairy’s (2018) framework to allow for asymmetric effects as a type of state dependence to estimate multipliers. While we find differences in the impulse response functions, the resulting multipliers do not differ by sign of the shock. Thus, we find no evidence of asymmetry of government spending multipliers.
Keywords: No keywords provided
JEL Codes: E62; N12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government Spending Shock (H69) | GDP (E20) |
| Positive Shock (E32) | GDP (E20) |
| Negative Shock (D81) | GDP (E20) |
| Impulse Response Functions (IRFs) of Government Spending (E62) | Impulse Response Functions (IRFs) of GDP (F69) |
| Anticipation Effect (D84) | Estimated Multipliers (short run) (C51) |
| Positive Shock (E32) | Multipliers (C39) |
| Negative Shock (D81) | Multipliers (C39) |