Valerie Ramey and Sarah Zubairy — Government spending multipliers in good times and in bad: Evidence from US historical data

There is no consensus among economists about the size of the multiplier of government purchases. It is not clear either how multipliers vary with the state of the economy. This column presents new evidence on this issue using large historical data set from the US. The findings suggest that there is no evidence that fiscal multipliers differ by the amount of unemployment or the degree of monetary accommodation.… 

Our findings suggest that there is no evidence that fiscal multipliers differ by the amount of slack in the economy or the degree of monetary accommodation. These results imply that, contrary to recent conjecture, government spending multipliers were not necessarily higher than average during the Great Recession. Our estimates imply that government spending during WWII lifted the economy out of the Great Depression, not because multipliers were so large, but because the amount of government spending was so great.

VOX.eu
Government spending multipliers in good times and in bad: Evidence from US historical data
Valerie Ramey, Professor in the Department of Economics, University of California, San Diego, and Sarah Zubairy, Assistant Professor in the Department of Economics, Texas A&M University