State-Dependent Government Spending Multipliers: Downward Nominal Wage Rigidity and Sources of Business Cycle Fluctuations

• 成果类型: Article
• 署名作者: Jo, YooN Joo; Zubairy, Sarah
• 署名单位: Texas A&M University System; Texas A&M University College Station; National Bureau of Economic Research
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20220156
• 发表日期: 2025
• 页码: 379-413
• 关键词: fiscal-policy; consistent; stimulus

摘要

In a New Keynesian model with downward nominal wage rigidity (DNWR), we show that government spending is more effective in stimulating output in a low-inflation recession relative to a high-inflation recession. The government spending multiplier is large when DNWR binds, but the nature of recession matters due to the opposing response of inflation and, consequently, for real wages. Using US historical time series data, we provide evidence of larger spending multipliers in low-inflation recessions and the importance of the depth of recessions. We also employ cross-sectional data from US states to document supporting evidence on multipliers and our proposed mechanism. (JEL E12, E24, E31, E32, E62, H50)