On the Size of the Government Spending Multiplier in the Euro Area

Fève, Patrick and Sahuc, Jean-Guillaume (2013) On the Size of the Government Spending Multiplier in the Euro Area. TSE Working Paper, n. 13-396

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Official URL: http://tse-fr.eu/pub/27174


This article addresses the existence of a wide range of estimated government spending multipliers in a dynamic stochastic general equilibrium model of the euro area. Our estimation results and counterfactual exercises provide evidence that omitting the interactions of key ingredients at the estimation stage (such as Edgeworth complementarity/subtitutability between private consumption and government expenditures, endogenous government spending policy and general time nonseparable preferences) paves the way for potentially large biases. We argue that uncertainty on the quantitative assessments of fiscal programmes could partly originate from these biases.

Item Type: Monograph (Working Paper)
Language: English
Date: April 2013
Uncontrolled Keywords: Government spending multiplier, DSGE models, Estimation bias, Euro area
JEL codes: C32 - Time-Series Models
E32 - Business Fluctuations; Cycles
E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:35
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:27174
URI: http://publications.ut-capitole.fr/id/eprint/15609

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