Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/264565 
Authors: 
Year of Publication: 
2022
Citation: 
[Journal:] Economic Inquiry [ISSN:] 1465-7295 [Volume:] 60 [Issue:] 3 [Publisher:] Wiley Periodicals, Inc. [Place:] Hoboken, USA [Year:] 2022 [Pages:] 1164-1185
Publisher: 
Wiley Periodicals, Inc., Hoboken, USA
Abstract: 
We investigate whether US government spending multipliers are higher during periods of heightened uncertainty or economic slumps as opposed to normal times. Using quarterly data from 1890 onward and local projections, we estimate a cumulative 1‐year multiplier of 2 during uncertain periods. In contrast, the multiplier is about 1 in times of high unemployment and about 0.4–0.8 during normal times. While we find positive employment effects in slumps as well as in uncertain times, two transmission channels can explain the higher multipliers in the latter: greater price flexibility leading to short‐term inflation (lowering the real interest rate) and diminishing risk premiums.
Subjects: 
fiscal policy
government spending multiplier
historical data
local projections
slump
uncertainty
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article
Document Version: 
Published Version

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