centre for microdata methods and practice

ESRC centre

cemmap is an ESRC research centre

ESRC

Keep in touch

Subscribe to cemmap news

Desperate times call for desperate measures: government spending multipliers in hard times

Authors: Sokbae (Simon) Lee , Yuan Liao , Myung Hwan Seo and Youngki Shin
Date: 16 July 2020
Type: Journal article, Economic Inquiry,
DOI: 10.1111/ecin.12919

Abstract

We investigate state‐dependent effects of fiscal multipliers and allow for endogenous sample splitting to determine whether the U.S. economy is in a slack state. When the endogenized slack state is estimated as the period of the unemployment rate higher than about 12%, the estimated cumulative multipliers are significantly larger during slack periods than nonslack periods and are above unity. We also examine the possibility of time‐varying regimes of slackness and find that our empirical results are robust under a more flexible framework. Our estimation results point out the importance of the heterogenous effects of fiscal policy and shed light on the prospect of fiscal policy in response to economic shocks from the current COVID‐19 pandemic.

Download full version
Previous version:
Sokbae (Simon) Lee, Yuan Liao, Myung Hwan Seo and Youngki Shin June 2020, Desperate times call for desperate measures: government spending multipliers in hard times, cemmap Working Paper, The IFS

Search cemmap

Search by title, topic or name.

Contact cemmap

Centre for Microdata Methods and Practice

How to find us

Tel: +44 (0)20 7291 4800

E-mail us