American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Are Government Spending Multipliers Greater during Periods of Slack? Evidence from Twentieth-Century Historical Data
American Economic Review
vol. 103,
no. 3, May 2013
(pp. 129–34)
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 United States and Canada. Using Jorda's (2005) method for estimating impulse responses, we find no evidence that multipliers are greater during periods of high unemployment in the United States. In every case, they are below unity. We do find evidence of higher multipliers during periods of slack in Canada, with some multipliers above unity.Citation
Owyang, Michael T., Valerie A. Ramey, and Sarah Zubairy. 2013. "Are Government Spending Multipliers Greater during Periods of Slack? Evidence from Twentieth-Century Historical Data." American Economic Review, 103 (3): 129–34. DOI: 10.1257/aer.103.3.129Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
- E32 Business Fluctuations; Cycles
- E62 Fiscal Policy
- N11 Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: U.S.; Canada: Pre-1913
- N12 Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: U.S.; Canada: 1913-