Output Spillovers from Fiscal Policy

27 Pages Posted: 30 Nov 2012

See all articles by Alan J. Auerbach

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: November 2012

Abstract

In this paper, we estimate the cross-country spillover effects of government purchases on output for a large number of OECD countries. Following the methodology in Auerbach and Gorodnichenko (2012a, b), we allow these multipliers to vary smoothly according to the state of the economy and use real-time forecast data to purge policy innovations of their predictable components. We also consider the responses of other key macroeconomic variables. Our findings suggest that cross-country spillovers have an important impact, and also confirm those of our earlier papers that fiscal shocks have a larger impact when the affected country is in recession.

Suggested Citation

Auerbach, Alan Jeffrey and Gorodnichenko, Yuriy, Output Spillovers from Fiscal Policy (November 2012). NBER Working Paper No. w18578. Available at SSRN: https://ssrn.com/abstract=2183037

Alan Jeffrey Auerbach (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics ( email )

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United States

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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