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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.

No abstract