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)