10027/19487
Richard T. Schwinn
Richard T.
Schwinn
Fiscal Volatility Diminishes Fiscal Multipliers
University of Illinois at Chicago
2015
Fiscal Policy
Macroeconomics
LaTex
Public
International
Trade
Monetary
Finance
Econometrics
Autoregressive
Impulse Responses
Impulse Response Functions
Panel
Panel Data
Time Series
Multipliers
Military
Defense Spending
2015-07-21 00:00:00
Thesis
https://indigo.uic.edu/articles/thesis/Fiscal_Volatility_Diminishes_Fiscal_Multipliers/10947827
The study investigates the observed heterogeneity in fiscal multipliers due to rational inat- tention. The previously untested prediction that fiscal volatility diminishes the multiplier is tested using a panel spanning 62 countries and 60 years. Endogeneity between output and gov- ernment purchases is addressed using defense spending, near vector autoregressive models, and instrumental variable techniques. Fiscal volatility, output gap, and trade openness are found to diminish the fiscal multiplier. Conditional on volatility, multipliers range from less than zero to 0.9 at full employment. Multipliers exceed one in severe recessions. (JEL E22, E62, H50)