Government Spending Multipliers under the Zero Lower Bound: Evidence from Japan
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Abstract
Using a rich dataset on government spending forecasts in Japan, we provide new evidence on the effects of unexpected changes in government spending when the nominal interest rate is near the zero lower bound (ZLB). The on-impact output multiplier is 1.5 in the ZLB period and 0.6 outside of it. We estimate that government spending shocks increase both private consumption and investment during the ZLB period, but crowd them out in the normal period. There is evidence that expected inflation increases more in the ZLB period than in the normal period.Citation
Miyamoto, Wataru, Thuy Lan Nguyen, and Dmitriy Sergeyev. 2018. "Government Spending Multipliers under the Zero Lower Bound: Evidence from Japan." American Economic Journal: Macroeconomics, 10 (3): 247-77. DOI: 10.1257/mac.20170131Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- E22 Investment; Capital; Intangible Capital; Capacity
- E23 Macroeconomics: Production
- E31 Price Level; Inflation; Deflation
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy
- E62 Fiscal Policy
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