NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Government Spending Multipliers in Good Times and in Bad: Evidence from U.S. Historical Data

Valerie A. Ramey, Sarah Zubairy

NBER Working Paper No. 20719
Issued in November 2014
NBER Program(s):   EFG   ME

This paper investigates whether U.S. government spending multipliers differ according to two potentially important features of the economy: (1) the amount of slack and (2) whether interest rates are near the zero lower bound. We shed light on these questions by analyzing new quarterly historical U.S. data covering multiple large wars and deep recessions. We estimate a state-dependent model in which impulse responses and multipliers depend on the average dynamics of the economy in each state. We find no evidence that multipliers differ by the amount of slack in the economy. These results are robust to many alternative specifications. The results are less clear for the zero lower bound. For the entire sample, there is no evidence of elevated multipliers near the zero lower bound. When World War II is excluded, some point estimates suggest higher multipliers during the zero lower bound state, but they are not statistically different from the normal state. Our results imply that, contrary to recent conjecture, government spending multipliers were not necessarily higher than average during the Great Recession.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20719

Users who downloaded this paper also downloaded* these:
Davis and Metcalf w20720 Does Better Information Lead to Better Choices? Evidence from Energy-Efficiency Labels
Becker A Theory of Marriage
Banerjee, Hanna, Kyle, Olken, and Sumarto w20923 The Power of Transparency: Information, Identification Cards and Food Subsidy Programs in Indonesia
Riera-Crichton, Vegh, and Vuletin w20533 Procyclical and Countercyclical Fiscal Multipliers: Evidence from OECD Countries
Owyang, Ramey, and Zubairy w18769 Are Government Spending Multipliers Greater During Periods of Slack? Evidence from 20th Century Historical Data
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us