TY  - JOUR
AU  - Leeper,Eric M.
AU  - Traum,Nora
AU  - Walker,Todd B.
TI  - Clearing Up the Fiscal Multiplier Morass
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17444
PY  - 2011
Y2  - September 2011
UR  - http://www.nber.org/papers/w17444
L1  - http://www.nber.org/papers/w17444.pdf
N1  - Author contact info:
Eric M. Leeper
Department of Economics
304 Wylie Hall
Indiana University
Bloomington, IN  47405
Tel: 812/855-9157
Fax: NA
E-Mail: eleeper@indiana.edu

Nora Traum
Department of Economics
Nelson Hall Campus Box 8110
North Carolina State University
Raleigh, NC 27695
E-Mail: nora_traum@ncsu.edu

Todd B. Walker
Department of Economics
105 Wylie Hall
Indiana University
Bloomington, IN  47405
E-Mail: walkertb@indiana.edu
AB  - Bayesian prior predictive analysis of five nested DSGE models suggests that model specifications and prior distributions tightly circumscribe the range of possible government spending multipliers.  Multipliers are decomposed into wealth and substitution effects, yielding uniform comparisons across models. By constraining the multiplier to tight ranges, model and prior selections bias results, revealing less about fiscal effects in data than about the lenses through which researchers choose to interpret data. When monetary policy actively targets inflation, output multipliers can exceed one, but investment multipliers are likely to be negative. Passive monetary policy produces consistently strong multipliers for output, consumption, and investment.
ER  -