Do Government Spending Multipliers Depend on the Sign of the Shock? / Nadav Ben Zeev, Valerie A. Ramey, Sarah Zubairy.

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Ben Zeev, Nadav

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w31015.Publication details: Cambridge, Mass. National Bureau of Economic Research 2023.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We analyze whether government spending multipliers differ by the sign of the shock. Using aggregate historical U.S. data, we apply Ben Zeev's (2020) nonlinear diagnostic tests and find evidence of nonlinearities in the impulse response functions of both government spending and GDP. We then extend Ramey and Zubairy's (2018) framework to allow for asymmetric effects as a type of state dependence to estimate multipliers. While we find differences in the impulse response functions, the resulting multipliers do not differ by sign of the shock. Thus, we find no evidence of asymmetry of government spending multipliers.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w31015 (Browse shelf(Opens below))	Not For Loan

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March 2023.

We analyze whether government spending multipliers differ by the sign of the shock. Using aggregate historical U.S. data, we apply Ben Zeev's (2020) nonlinear diagnostic tests and find evidence of nonlinearities in the impulse response functions of both government spending and GDP. We then extend Ramey and Zubairy's (2018) framework to allow for asymmetric effects as a type of state dependence to estimate multipliers. While we find differences in the impulse response functions, the resulting multipliers do not differ by sign of the shock. Thus, we find no evidence of asymmetry of government spending multipliers.