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Fève, Patrick
, Matheron, Julien and Sahuc, Jean-Guillaume
(2012)
A Pitfall with DSGE-Based, Estimated, Government Spending Multipliers.
TSE Working Paper, n. 12-289
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Abstract
This paper examines issues related to the estimation of the government spending multiplier (GSM) in a Dynamic Stochastic General Equilibrium context. We stress a potential source of bias in the GSM arising from the combination of Edgeworth complementarity/substitutability between private
consumption and government expenditures and endogenous government expenditures. Due to crossequation restrictions, omitting the endogenous component of government policy at the estimation stage would lead an econometrician to underestimate the degree of Edgeworth complementarity and,
consequently, the long-run GSM. An estimated version of our model with US postwar data shows that this bias matters quantitatively. The results prove to be robust to a number of perturbations.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | April 2012 |
| Uncontrolled Keywords: | Government spending rules, DSGE models, Edgeworth complementarity/substitutability, Multiplier |
| JEL Classification: | C32 - Time-Series Models E32 - Business Fluctuations; Cycles E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 09 Jul 2014 17:24 |
| Last Modified: | 02 Apr 2021 15:47 |
| OAI Identifier: | oai:tse-fr.eu:25755 |
| URI: | https://publications.ut-capitole.fr/id/eprint/15252 |
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- A Pitfall with DSGE-Based, Estimated, Government Spending Multipliers. (deposited 09 Jul 2014 17:24) [Currently Displayed]
