Tools
Tools
Fève, Patrick
, Matheron, Julien and Sahuc, Jean-Guillaume
(2013)
A Pitfall with Estimated DSGE-Based Government Spending Multipliers.
American Economic Journal: Macroeconomics, 5 (4).
pp. 141-178.
This is the latest version of this item.
Abstract
This paper examines issues related to the estimation of the government spending multiplier (GSM) in a DSGE context. We stress a source of bias in the GSM arising from the combination of endogenous government expenditures and Edgeworth complementarity between private consumption and government expenditures. Due to cross-equation 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 are robust to a number of perturbations.
| Item Type: | Article |
|---|---|
| Language: | English |
| Date: | October 2013 |
| Refereed: | Yes |
| Uncontrolled Keywords: | Government spending rules, DSGE models, Edgeworth complementarity/substitutability, Multiplier |
| JEL Classification: | E13 - Neoclassical E23 - Production E32 - Business Fluctuations; Cycles E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation H50 - General |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 09 Jul 2014 17:32 |
| Last Modified: | 02 Apr 2021 15:47 |
| OAI Identifier: | oai:tse-fr.eu:26636 |
| URI: | https://publications.ut-capitole.fr/id/eprint/15472 |
Available Versions of this Item
-
A Pitfall with DSGE-Based, Estimated, Government Spending Multipliers. (deposited 09 Jul 2014 17:24)
- A Pitfall with Estimated DSGE-Based Government Spending Multipliers. (deposited 09 Jul 2014 17:32) [Currently Displayed]
