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Does scal policy stimulate output? SVARs have been used to address this question but no stylized facts have emerged. We derive analytical relationships between the output elasticities of scal variables and scal multipliers. We show that standard identi cation schemes imply different priors on elasticities, generating a large dispersion in multiplier estimates. We then use extra-model information to narrow the set of empirically plausible elasticities, allowing for sharper inference on multipliers. Our results for the U.S. for the period 1947-2006 suggest that the probability of the tax multiplier being larger than the spending multiplier is below 0.5 at all horizons. JEL Classi cation: E62; C52.

The issue of whether public capital is productive has received a great deal of recent attention. Yet, empirical analyses of public capital productivity have been limited to a small sample of countries for which official capital stock estimates are available. Building on a new database that provides internationally comparable capital stock estimates, this paper estimates the dynamic effects of public capital using the vector autoregressive (VAR) methodology for a large set of OECD countries. The empirical results suggest that there is evidence for positive output effects of public capital in OECD countries, but hardly any evidence for positive employment effects. Copyright Springer Science + Business Media, Inc. 2005public capital, VAR model, cointegration, OECD countries,

Does scal policy stimulate output? SVARs have been used to address this question but no stylized facts have emerged. We derive analytical relationships between the output elasticities of scal variables and scal multipliers. We show that standard identi cation schemes imply different priors on elasticities, generating a large dispersion in multiplier estimates. We then use extra-model information to narrow the set of empirically plausible elasticities, allowing for sharper inference on multipliers. Our results for the U.S. for the period 1947-2006 suggest that the probability of the tax multiplier being larger than the spending multiplier is below 0.5 at all horizons.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Is there a lack of public capital in the European Union? Terms of use: Documents in IntroductionThe decline in government investment in many OECD countries has alerted policy makers and researchers alike. In the Broad Economic Policy Guidelines, the European Commission (2001) recommended the member countries of the European Union to draw "an appropriate balance and sequencing […] between running down public debt, cutting taxes and financing public investment in key areas. To this end Member States should […] redirect public expenditures towards physical and human capital accumulation." Modigliani et al. (1998) and Blanchard and Giavazzi (2003), in turn, proposed to exclude net public investment from the measure of the budget deficit underlying the Stability and Growth Pact in order to prevent future fiscal consolidation in the euro area from negatively affecting public capital spending. Finally, at the end of the 1990s, the government in the United Kingdom launched a large multi-annual spending programme aimed at reversing the falling trend in the ratio of public capital spending to GDP, which had fallen to a very low level by 1997 (HM Treasury 2002).Figure 1 displays the ratios of government investment and government capital stock to GDP for a group of 22 OECD countries and for a group of 14 European Union member states. 1 The left-hand panel of the figure shows that in both groups of countries government investment in relation to GDP declined strongly in the 1970s and remained roughly stable in the 1980s. In the 1990s, government investment in relation to GDP again fell in the EU, probably reflecting in part fiscal consolidation efforts in the run-up to Economic and Monetary Union, while in other OECD countries-especially in Japan-government investment grew. Based on the evolution of public investment, the right-hand panel of Figure 1 depicts the evolution of public capital stocks.While government investment in relation to GDP has fallen strongly in OECD countries on average over the past three decades, the ratio of government capital to GDP has decreased only slightly. Had the high investment rates of the early 1970s been sustained, government capital to GDP ratios would even have increased. Whether the recent decline in the ratio of government capital to GDP is a reason for concern depends on the economic benefits and costs of additional government capital and is, thus, an empirical question.The calls for an expansion of public capital spending, esp...

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.

Identifying fiscal multipliers, i.e. the effect of discretionary fiscal actions on growth, is challenging. It requires comparing the realisation of growth after a fiscal action to a hypothetical growth path that would have prevailed in the absence of such action. Deriving the hypothetical path usually involves very strong assumptions. This paper helps to relax some of the assumptions, using a unique new dataset on the European Commission’s recommendations under the so-called excessive deficit procedure (EDP). These recommendations provide information on both output growth in a no-policy-change baseline forecast and an alternative forecast of growth incorporating the size of fiscal consolidation recommended under the EDP. A comparison of these two alternative scenarios allows us to infer country-specific fiscal multipliers implicitly applied by the Commission in its EDP recommendations for a sample of 24 countries over the period 2009-2015. Our results confirm Blanchard and Leigh (2013, 2014) presumption that fiscal multipliers used by forecasters were adjusted upwards during the European sovereign debt crisis, albeit starting from lower than commonly assumed levels. Contrary to Blanchard and Leigh (2013, 2014) we do not find evidence that the “true” ex-post fiscal multipliers systematically exceeded 1 in the early crisis years.