State dependence of fiscal multipliers: the source of fluctuations matters

• 成果类型: Article
• 署名作者: Ghassibe, Mishel; Zanetti, Francesco
• 署名单位: University of Oxford
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2022.09.003
• 发表日期: 2022
• 页码: 1-23
• 关键词: Business cycle; Fiscal multipliers; state dependence; Search in the goods market

摘要

We develop a general theory of state-dependent fiscal multipliers in a framework fea-turing two empirically relevant frictions: idle capacity and unsatisfied demand. Our key novel finding is that the source of fluctuations determines the cyclicality of multipliers. Policies that stimulate demand, such as government spending, have multipliers that are large in demand-driven recessions, but small and possibly negative in supply-driven down-turns. Conversely, policies that boost supply, such as cuts in payroll taxes, are ineffective in demand-driven recessions, but powerful if the downturn is supply-driven. Austerity, im-plemented by a reduction in government consumption, can be the policy with the largest multiplier in supply-side recessions and demand-driven booms, provided elasticities of la-bor demand and supply are sufficiently low. We obtain model-free empirical support for our predictions by developing a novel econometric specification that allows to estimate spending and tax multipliers in recessions and expansions, conditional on those being ei-ther demand-or supply-driven.(c) 2022 Elsevier B.V. All rights reserved.