TY  - JOUR
AU  - Auerbach, Alan J
AU  - Gorodnichenko, Yuriy
TI  - Fiscal Multipliers in Recession and Expansion
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17447
PY  - 2011
Y2  - September 2011
DO  - 10.3386/w17447
UR  - http://www.nber.org/papers/w17447
L1  - http://www.nber.org/papers/w17447.pdf
N1  - Author contact info:
Alan J. Auerbach
Department of Economics
530 Evans Hall, #3880
University of California, Berkeley
Berkeley, CA 94720-3880
Tel: 510/643-0711
Fax: 510/643-0413
E-Mail: auerbach@econ.berkeley.edu

Yuriy Gorodnichenko
Department of Economics
530 Evans Hall #3880
University of California, Berkeley
Berkeley, CA 94720-3880
Tel: 510/643-0720
Fax: 510/642-6615
E-Mail: ygorodni@econ.berkeley.edu
M1  - published as Alan J. Auerbach, Yuriy Gorodnichenko. "Fiscal Multipliers in Recession and Expansion," in Alberto Alesina and Francesco Giavazzi, editors, "Fiscal Policy after the Financial Crisis" University of Chicago Press (2013)

AB  - In this paper, we estimate government purchase multipliers for a large number of OECD countries, allowing these multipliers to vary smoothly according to the state of the economy and using real-time forecast data to purge policy innovations of their predictable components.  We adapt our previous methodology (Auerbach and Gorodnichenko, 2011) to use direct projections rather than the SVAR approach to estimate multipliers, to economize on degrees of freedom and to relax the assumptions on impulse response functions imposed by the SVAR method.  Our findings confirm those of our earlier paper.  In particular, GDP multipliers of government purchases are larger in recession, and controlling for real-time predictions of government purchases tends to increase the estimated multipliers of government purchases in recession.  We also consider the responses of other key macroeconomic variables and find that these responses generally vary over the cycle as well, in a pattern consistent with the varying impact on GDP.
ER  -