I just estimated twenty million fiscal multipliers

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Year of publication 2017
Type Conference abstract
MU Faculty or unit

Faculty of Economics and Administration

Description We analyse the role played by data and modelling choices as determinants of the size of estimated fiscal multipliers. Using data for European economies, we assess empirically how the methodology used to obtain the multiplier affects its size and accuracy. The results based on over twenty million fiscal multiplier estimates indicate that many seemingly harmless choices play a significant role. Narrower definition of government revenues lead to an increase in the multiplier (and the precision of its estimate), whereas narrower definition of government spending lead to a decrease of the tax cut multiplier (and the precision of its estimate). If the fiscal data is smoothed beforehand, the multipliers are estimated as higher and with lower volatility. In case that fiscal shocks are identified with causal ordering, extending the data used for inflation and the interest rate increases the value of the multiplier. For spending multipliers, using HICP to deflate nominal variables (instead of GDP deflator) and following ESA 95 (instead of ESA 2010) increases the estimate of the multiplier.
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