Expansionary and contractionary fiscal multipliers in the U.S.

33 Pages Posted: 6 Apr 2022

See all articles by George Kapetanios

George Kapetanios

King's College, London

Panagiotis Koutroumpis

Queen Mary University London

Christopher Tsoukis

Keele University

Date Written: March 16, 2022


We estimate the fiscal (spending) multiplier using quarterly U.S. data, 1986-2017. We define government spending shocks as actual minus expected expenditure growth, the latter obtained from the Survey of Professional Forecasters. We employ the ST-VAR model with the local projections method. A key testable conjecture is that the effects of positive and negative spending shocks have numerically different effects (the latter being stronger). Although we cannot formally reject the null of equality, the conjecture does hold in general. We also find evidence of state-dependence of multipliers as previously pointed out.

Keywords: Fiscal multiplier, government spending, stabilisation policy, local projections

JEL Classification: E60, E62, H30

Suggested Citation

Kapetanios, George and Koutroumpis, Panagiotis and Tsoukis, Christopher, Expansionary and contractionary fiscal multipliers in the U.S. (March 16, 2022). Available at SSRN: https://ssrn.com/abstract=4059515 or http://dx.doi.org/10.2139/ssrn.4059515

George Kapetanios

King's College, London ( email )

30 Aldwych
London, WC2B 4BG
United Kingdom
+44 20 78484951 (Phone)

Panagiotis Koutroumpis (Contact Author)

Queen Mary University London ( email )

Office GC 3.32
Graduate Centre, Mile End Campus
London, E14NS
United Kingdom
02078825872 (Phone)

HOME PAGE: http://www.pkoutroumpis.com

Christopher Tsoukis

Keele University ( email )


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