Are Government Spending Multipliers Greater During Periods of Slack? Evidence from 20th Century Historical Data

Michael Owyang, Valerie Ramey and Sarah Zubairy

No 18769, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A key question that has arisen during recent debates is whether government spending multipliers are larger during times when resources are idle. This paper seeks to shed light on this question by analyzing new quarterly historical data covering multiple large wars and depressions in the U.S. and Canada. Using an extension of Ramey's (2011) military news series and Jordà's (2005) method for estimating impulse responses, we find no evidence that multipliers are greater during periods of high unemployment in the U.S. In every case, the estimated multipliers are below unity. We do find some evidence of higher multipliers during periods of slack in Canada, with some multipliers above unity.

JEL-codes: E62 (search for similar items in EconPapers)
Date: 2013-02
New Economics Papers: this item is included in nep-his and nep-mac
Note: EFG
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Citations: View citations in EconPapers (365)

Published as Owyang, Michael T., Valerie A. Ramey, and Sarah Zubairy. 2013. "Are Government Spending Multipliers Greater during Periods of Slack? Evidence from Twentieth-Century Historical Data." American Economic Review, 103(3): 129-34.

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Working Paper: Are government spending multipliers greater during periods of slack? evidence from 20th century historical data (2013)
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