Identifying Government Spending Shocks: It's all in the Timing*

Ramey, Valerie A.

doi:10.1093/qje/qjq008

Cited by 1,320 publications

(1,542 citation statements)

References 38 publications

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“…Such multipliers are often found to be of modest amount, typically lower than one (Barro and Redlick (2011), Ramey (2011a)). However, the quantiÖcation of Öscal multipliers with standard VARs is controversial for two reasons.…”

Section: Introductionmentioning

confidence: 99%

“…Perotti (1999) shows that Öscal multipliers may depend on the debt-to-GDP ratio in place when Öscal shocks occur. For a DSGE-based quantiÖcation of Öscal multipliers in presence of normal vs. abnormal debt-to-GDP ratios, see Cantore, are likely to be of great relevance in the transmission of Öscal policy shocks, a phenomenon often referred to as "Öscal foresight" (see, among others, Yang (2005), Fisher and Peters (2010), Mertens and Ravn (2011), Ramey (2011b), Gambetti (2012aGambetti ( , 2012b, Kriwoluzky (2012), Leeper, Walker, and Yang (2013)). Modeling a standard set of U.S. variables with a medium-scale structural model that allows for foresight up to eight quarters, Schmitt-Grohe and Uribe (2012) Önd that about sixty percent of the variance of government spending is due to anticipated shocks.…”

Section: Introductionmentioning

confidence: 99%

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Estimating Fiscal Multipliers: News from a Nonlinear World

et al. 2014

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We estimate nonlinear VARs to assess to what extent Öscal spending multipliers are countercyclical in the United States. We deal with the issue of nonfundamentalness due to Öscal foresight by appealing to sums of revisions of expectations of Öscal expenditures. This measure of anticipated Öscal shocks is shown to carry valuable information of future dynamics of public spending. Results based on generalized impulse responses suggest that Öscal spending multipliers in recessions are greater than one, but not statistically larger than in expansions. However, nonlinearities arise when focusing on deep recessions vs. strong expansionary periods.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Estimating Fiscal Multipliers: News from a Nonlinear World

et al. 2014

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“…While this is a very intriguing question, we leave the use of higher frequency indices in a quarterly model under other specifications (such as MiDAS framework) for future research. 4 Foresight issues have also been dealt with through the use of the "narrative method", which however suffers from the subjectiveness in the selection of the "news" variable (see (Ramey 2011) and (Owyang et al 2013) for a detailed view of the methodology).…”

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confidence: 99%

Size Effects of Fiscal Policy and Business Confidence in the Euro Area

Michail

Savva

Koursaros

2017

IJFS

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Abstract:In the aftermath of the European sovereign debt crisis (2009)(2010)(2011)(2012)(2013)(2014), the management of expectations has risen in importance. However, policy responses have emphasized the management of fiscal spending without examining the impact changes in the business confidence have on the economy. This paper uses a Factor-Augmented Vector Autoregressive specification, which allows for a larger information set covering both domestic and international developments, to measure the responses of five Euro Area economies to a one percent shock in government consumption and business confidence. The evidence suggests that even though the response to a government consumption shock is strong, a shock in expectations has an even greater effect. This points out to the fact that perceptions about the future and trust in the policymaker are much more important than previously considered. Thus, especially in (but not limited to) times of turbulence, or during efforts of stabilization and/or structural reforms, more emphasis should be placed on the overall credibility of the decisions, which could help to mitigate any potential adverse effects from the policies.

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“…Only recently, Ramey [3] presented the evidence consistent with this prediction. However, several other studies report the positive impact of government spending shock on private consumption (e.g., Galí et al [4]; Beetsma and Giuliodori [5]).…”

Section: Introductionmentioning

confidence: 84%

A Comprehensive Analysis of the Response of Private Consumption to Government Spending

Funashima¹

2017

TEL

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This paper considers a simple model in which government spending is productive and has a complementary relationship with private consumption to study the response of the latter to government spending. We discuss how these two characteristics can yield empirical observations that indicate a positive response of private consumption to government spending. By assuming some plausible parameter settings, we demonstrate that these dual aspects of government spending, which are normally treated separately in the literature, are inseparably linked. Our findings reveal that in addition to the presence of complementarity, productivity-even if minimal-increases the likelihood of generating a positive consumption response.

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Identifying Government Spending Shocks: It's all in the Timing*

Cited by 1,320 publications

References 38 publications

Estimating Fiscal Multipliers: News from a Nonlinear World

Estimating Fiscal Multipliers: News from a Nonlinear World

Size Effects of Fiscal Policy and Business Confidence in the Euro Area

A Comprehensive Analysis of the Response of Private Consumption to Government Spending

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