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Jorge Restrepo
This paper uses the strategy and data of Blanchard and Perotti (BP) to identify fiscal shocks and estimate fiscal multipliers for the United States. With these results, it computes the cumulative multiplier of Ramey and Zubairy (2018), now common in the literature. It finds that, contrary to the peak and through multipliers reported by BP, the cumulative tax multiplier is much larger than the cumulative spending one. Hence, the conclusions depend on the definition of multiplier. This methodology is also used to estimate the effects of fiscal shocks on economic activity in eight Latin American countries. The results suggest that the fiscal multipliers vary significantly across countries, and in some cases multipliers are larger than previously estimated.
Jorge Restrepo

, in colors, and the original published chart. Figure 1. US responses to a spending shock: deterministic trends* 6 As expected, spending shocks have a positive effect on output. According to BP, the peak multiplier is 1.29, reached in 15 quarters. Thus, one additional dollar of spending increases GDP by 1.29 dollars. Based on the responses obtained with the replication, the cumulative (integral) multiplier, m = Σ t = 1 8 Y r e s p o n s e t Σ t = 1 8 S r e s p o n s e t is estimated at 0.52 after two years and 0.89 after four years, significantly smaller

Vincent Belinga and Mr. Constant A Lonkeng Ngouana

ZLB and Estimated Multipliers B. What Happens at Times of Slack? V. Sensitivity Analysis A. Model Parametrization: Smoothing Parameter B. Measure of Inflation Used in the Estimation of the Taylor Rule VI. Conclusion, Policy Implications, and Possible Extensions References Appendices Tables 1. GDP Cumulative and Peak Multipliers: “Anticipated” versus “Non-anticipated” Federal Spending Shocks 2. GDP Cumulative and Peak Multipliers (extended sample through 2012Q4) 3. GDP Cumulative and Peak Multipliers at Time of Slack and Non

report multipliers at selected horizons without necessarily taking a stance on the value of the peak multiplier. 3 Investment in public infrastructure that is labor intensive is likely to have a lower import content. 4 However, during downturns, the stabilizers will result in automatic fiscal stimulus, which can compensate for the lower multipliers. 5 There is a large literature on the symmetric case, namely expansionary fiscal contractions. 6 Available at http://0-www-imf-org.library.svsu.edu/external/np/g20/pdf/031909a.pdf 7 In particular, in emerging

Mr. Antonio Spilimbergo, Mr. Martin Schindler, and Mr. Steven A. Symansky

quarter or a year), different multipliers are used: The impact multiplier ( ≡ ΔY ( t ) ΔG ( t ) ) . The multiplier at some horizon N ( ≡ ΔY ( t + N ) ΔG ( t ) ) . The peak multiplier, defined as the largest ( ≡ max N ΔY ( t + N ) ΔG ( t ) ) . over any horizon N . The cumulative multiplier, defined as the cumulative change in output over the cumulative change in fiscal expenditure at some horizon N ( ≡ Σ j = 0 N ΔY ( t + j ) Σ j = 0 N ΔG ( t + j ) ) . The cumulative multiplier, which is often the most appropriate measure, is typically larger

Vincent Belinga and Mr. Constant A Lonkeng Ngouana
This paper provides estimates of the government spending multiplier over the monetary policy cycle. We identify government spending shocks as forecast errors of the growth rate of government spending from the Survey of Professional Forecasters (SPF) and from the Greenbook record. The state of monetary policy is inferred from the deviation of the U.S. Fed funds rate from the target rate, using a smooth transition function. Applying the local projections method to quarterly U.S. data, we find that the federal government spending multiplier is substantially higher under accommodative than non-accommodative monetary policy. Our estimations also suggest that federal government spending may crowd-in or crowd-out private consumption, depending on the extent of monetary policy accommodation. The latter result reconciles—in a unified framework—apparently contradictory findings in the literature. We discuss the implications of our findings for the ongoing normalization of monetary conditions in advanced economies.
Mr. Antonio Spilimbergo, Mr. Martin Schindler, and Mr. Steven A. Symansky
This paper provides background information for policymakers on fiscal multipliers, including quantitative estimates. The fiscal multiplier is the ratio of a change in output to an exogenous change in the fiscal deficit with respect to their respective baselines. The size of the multiplier is larger if: leakages are few; the monetary conditions are accommodative; and the country’s fiscal position after the stimulus is sustainable. Fiscal expansions can be contractionary if they decrease consumers’ and investors’ confidence, especially if the fiscal expansion raises, or reinforces, fiscal sustainability concerns. Fiscal multipliers have been calculated for some countries but should be carefully re-examined considering the current events. The degree of financial market development has an ambiguous effect on multipliers, depending on how the degree of financial development affects liquidity constraints, and the government’s ability to finance the fiscal deficit. The past research on multiplier estimates can provide guidance in developing multiplier estimates, but judgment, based on current conditions, is important.
Vincent Belinga and Mr. Constant A Lonkeng Ngouana

: (i) the “cumulative multiplier” (one-year, two-year, and four-year integral), defined as the ratio of the sum of the response of output over the sum of the response of government spending through that period; and (ii) the “peak multiplier” defined as the ratio of the response of output and government spending at their respective peaks. These measures of spending multipliers are common in the literature (see Owyang, Ramey, and Zubairy (2013) and Auerbach and Gorodnichenko (2013) ). Table 1. GDP Cumulative and Peak Multipliers: “Anticipated” versus “Non

International Monetary Fund

Without Debt Feedback Baseline fiscal multipliers 63. Estimates in a model without debt feedback give a peak multiplier of 1.1 for expenditures and 0.3 for revenues. 8 The expenditure multiplier rises gradually from 0.4 after a year to 0.6 after two years and to a peak value of 1.1 after six years before declining slightly. The revenue multiplier peaks after eight quarters around 0.3, then declines to a long-term value of 0.2. During the first year, the sign of the multiplier is positive, implying that a tax increase induces an increase in GDP. While the