Article

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

Patrick Fève et Jean-Guillaume Sahuc

Résumé

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.

Mots-clés

Government spending multiplier; DSGE models; Estimation bias; Euro area;

Codes JEL

  • C32: Time-Series Models • Dynamic Quantile Regressions • Dynamic Treatment Effect Models • Diffusion Processes
  • E32: Business Fluctuations • Cycles
  • E62: Fiscal Policy

Remplace

Patrick Fève et Jean-Guillaume Sahuc, « On the Size of the Government Spending Multiplier in the Euro Area », TSE Working Paper, n° 13-396, avril 2013, révision novembre 2013.

Référence

Patrick Fève et Jean-Guillaume Sahuc, « On the Size of the Government Spending Multiplier in the Euro Area », Oxford Economic Papers, vol. 67, n° 3, juillet 2015, p. 531–552.

Publié dans

Oxford Economic Papers, vol. 67, n° 3, juillet 2015, p. 531–552