Replication data for: A Pitfall with Estimated DSGE-Based Government Spending Multipliers

Principal Investigator(s): View help for Principal Investigator(s) Patrick Fève; Julien Matheron; Jean-Guillaume Sahuc

Version: View help for Version V1

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Project Citation:

Fève, Patrick, Matheron, Julien, and Sahuc, Jean-Guillaume. Replication data for: A Pitfall with Estimated DSGE-Based Government Spending Multipliers. Nashville, TN: American Economic Association [publisher], 2013. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E114279V1

Project Description

Summary: This paper examines issues related to the estimation of the government spending multiplier (GSM) in a DSGE context. We stress a source of bias in the GSM arising from the combination of endogenous government expenditures and Edgeworth complementarity between private consumption and government expenditures. Due to cross-equation restrictions, omitting the endogenous component of government policy at the estimation stage would lead an econometrician to underestimate the degree of Edgeworth complementarity and, consequently, the long-run GSM. An estimated version of our model with US postwar data shows that this bias matters quantitatively. The results are robust to a number of perturbations.

Scope of Project

JEL Classification:
      E13 General Aggregative Models: Neoclassical
      E23 Macroeconomics: Production
      E32 Business Fluctuations; Cycles
      E62 Fiscal Policy
      H50 National Government Expenditures and Related Policies: General

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V1 [2019-10-12]

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