Heterogeneous Government Spending Multipliers in the Era Surrounding the Great Recession

Marco Bernardini; Selien De Schryder; Gert Peersman

doi:10.1162/rest_a_00830

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Heterogeneous Government Spending Multipliers in the Era Surrounding the Great Recession

Marco Bernardini¹; Selien De Schryder²; Gert Peersman²

¹ Bank of Italy · ² Ghent University

The Review of Economics and Statistics 2020 open access

We use novel quarterly data of U.S. states to examine the dynamics of relative spending multipliers in the decade surrounding the Great Recession. While multipliers were around 1 in expansions, they reached values above 4 when a state was in a recession. Also a high (low) degree of household indebtedness augmented (lowered) a state's multiplier by 0.5 in expansions and 2 in recessions. We further document modest positive spillover effects across states and show that a mere redistribution of spending across states also had a significant influence on the aggregate U.S. economy due to cross-state heterogeneity of the effects.

DOI: 10.1162/rest_a_00830
Volume: 102 (2)
Pages: 304-322
Language: en
Export: BibTeX
Sources: openalex crossref