Output Spillovers from Fiscal Policy

Alan J. Auerbach, Yuriy Gorodnichenko

NBER Working Paper No. 18578
Issued in November 2012
NBER Program(s):Economic Fluctuations and Growth, Public Economics

In this paper, we estimate the cross-country spillover effects of government purchases on output for a large number of OECD countries. Following the methodology in Auerbach and Gorodnichenko (2012a, b), we allow these multipliers to vary smoothly according to the state of the economy and use real-time forecast data to purge policy innovations of their predictable components. We also consider the responses of other key macroeconomic variables. Our findings suggest that cross-country spillovers have an important impact, and also confirm those of our earlier papers that fiscal shocks have a larger impact when the affected country is in recession.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w18578

Published: Alan J. Auerbach & Yuriy Gorodnichenko, 2013. "Output Spillovers from Fiscal Policy," American Economic Review, American Economic Association, vol. 103(3), pages 141-46, May. citation courtesy of