TY - JOUR AU - Chahrour, Ryan AU - Schmitt-Grohé, Stephanie AU - Uribe, Martín TI - A Model-Based Evaluation of the Debate on the Size of the Tax Multiplier JF - National Bureau of Economic Research Working Paper Series VL - No. 16169 PY - 2010 Y2 - July 2010 DO - 10.3386/w16169 UR - http://www.nber.org/papers/w16169 L1 - http://www.nber.org/papers/w16169.pdf N1 - Author contact info: Ryan Chahrour Department of Economics Boston College 140 Commonwealth Avenue Chestnut Hill, MA 02467 E-Mail: ryan.chahrour@bc.edu Stephanie Schmitt-Grohé Department of Economics Columbia University 420 West 118th Street, MC 3308 New York, NY 10027 Tel: 212/854-8059 Fax: 212/854-4010 E-Mail: stephanie.schmittgrohe@columbia.edu Martín Uribe Department of Economics Columbia University International Affairs Building New York, NY 10027 Tel: 212 851 4008 Fax: 212 854 8059 E-Mail: martin.uribe@columbia.edu M1 - published as Ryan Chahrour, Stephanie Schmitt-Grohé, Martín Uribe. "A Model-Based Evaluation of the Debate on the Size of the Tax Multiplier," in Roger Gordon and Roberto Perotti, organizers, "Fiscal Policy (Trans-Atlantic Public Economics Seminar, TAPES)" American Economic Journal: Economic Policy 4(2), May 2012 (American Economic Association) (2012) AB - The SVAR and narrative approaches to estimating tax multipliers deliver significantly different results. The former yields multipliers of about 1 percent, whereas the latter produces much larger multipliers of about 3 percent. The SVAR and narrative approaches differ along two important dimensions: the identification scheme and the reduced-form transmission mechanism. This paper uses a DSGE-model approach to evaluate the hypothesis that the different tax multipliers stemming from the SVAR and narrative approaches are due to differences in the assumed reduced-form transmission mechanisms. The main finding of the paper is that in the context of the DSGE model employed this hypothesis is rejected. Instead, the observed differences in estimated multipliers are due either to both models failing to identify the same tax shock, or to small-sample uncertainty. ER -