Fiscal multipliers in recessions

Canzoneri, Matthew; Collard, Fabrice; Dellas, Harris; Diba, Behzad Tabatabai (2016). Fiscal multipliers in recessions. Economic journal, 126(590), pp. 75-108. Wiley 10.1111/ecoj.12304

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Standard business cycle models have difficulties generating large, state-dependent fiscal multipliers. Employing a model of costly financial intermediation based on Curdia–Woodford, we show that fiscal multipliers can be strongly state dependent: fiscal expansions during recessions may lead to multiplier values exceeding two, while similar expansions during economic booms would produce values falling short of unity. This pattern obtains if the spread (the financial friction) is more sensitive to fiscal policy during recessions than during expansions, a feature that is present in the data. Our results are consistent with recent empirical work documenting the state contingency of multipliers.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Collard, Fabrice; Dellas, Harris and Diba, Behzad Tabatabai

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

0013-0133

Publisher:

Wiley

Language:

English

Submitter:

Eva Marina Zuberbühler

Date Deposited:

11 Jul 2017 09:05

Last Modified:

11 Jul 2017 09:05

Publisher DOI:

10.1111/ecoj.12304

BORIS DOI:

10.7892/boris.93168

URI:

https://boris.unibe.ch/id/eprint/93168

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