{"title":"The Impact of r-g on the Euro-Area Government Spending Multiplier","authors":"Mario di Serio, Matteo Fragetta, Giovanni Melina","doi":"10.5089/9781513569512.001","DOIUrl":null,"url":null,"abstract":"We compute government spending multipliers for the Euro Area (EA) contingent on the interestgrowth\ndifferential, the so-called r-g. Whether the fiscal shock occurs when r-g is positive or negative\nmatters for the size of the multiplier. Median estimates vary conditional on the specification, but the\ndifference between multipliers in the negative and positive r-g regimes differs systematically from\nzero with very high probability. Over the medium run (5 years), median cumulated multipliers range\nbetween 1.22 and 1.77 when r-g is negative, and between 0.51 and 1.26 when r-g is positive. We\nshow that the results are not driven by the state of the business cycle, the monetary policy stance, or\nthe level of government debt, and that the multiplier is inversely correlated with r-g. The calculations\nare based on the estimates of a factor-augmented interacted panel vector-autoregressive model. The\neconometric approach deals with several technical problems highlighted in the empirical\nmacroeconomic literature, including the issues of fiscal foresight and limited information.","PeriodicalId":14326,"journal":{"name":"International Monetary Fund (IMF) Research Paper Series","volume":"16 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"3","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Monetary Fund (IMF) Research Paper Series","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.5089/9781513569512.001","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 3
Abstract
We compute government spending multipliers for the Euro Area (EA) contingent on the interestgrowth
differential, the so-called r-g. Whether the fiscal shock occurs when r-g is positive or negative
matters for the size of the multiplier. Median estimates vary conditional on the specification, but the
difference between multipliers in the negative and positive r-g regimes differs systematically from
zero with very high probability. Over the medium run (5 years), median cumulated multipliers range
between 1.22 and 1.77 when r-g is negative, and between 0.51 and 1.26 when r-g is positive. We
show that the results are not driven by the state of the business cycle, the monetary policy stance, or
the level of government debt, and that the multiplier is inversely correlated with r-g. The calculations
are based on the estimates of a factor-augmented interacted panel vector-autoregressive model. The
econometric approach deals with several technical problems highlighted in the empirical
macroeconomic literature, including the issues of fiscal foresight and limited information.