Discussion of “What determines government spending multipliers?” by Giancarlo Corsetti, Andr ´ e Meier, and Gernot J. M ¨ uller Robert E. Hall Hoover Institution and Department of Economics, Stanford Conference on Global Dimensions of the Financial Crisis Federal Reserve Bank of New York June 3 and 4, 2010 1
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Discussion of “What determines
government spending
multipliers?”
by Giancarlo Corsetti, Andre
Meier, and Gernot J. Muller
Robert E. Hall
Hoover Institution and Department of Economics, Stanford
Conference on Global Dimensions of the Financial CrisisFederal Reserve Bank of New York
June 3 and 4, 2010
1
2
Detrended gov purchases as
percent of GDP, OECD30
25
17.54 17.55 17.59 17.62 17.62 17.64 17.67 17.6520
15
10
5
0
Q1‐2008 Q2‐2008 Q3‐2008 Q4‐2008 Q1‐2009 Q2‐2009 Q3‐2009 Q4‐2009
3
Detrended gov purchases as
percent of GDP, Euro nations30
20 02 20 09 20 09 20 13 20 16 20 20 20.26 20 16
25
20.02 20.09 20.09 20.13 20.16 20.20 20.26 20.1620
15
€10 €5
0
Q1‐2008 Q2‐2008 Q3‐2008 Q4‐2008 Q1‐2009 Q2‐2009 Q3‐2009 Q4‐2009
4
Detrended gov purchases as
percent of GDP, USA30
25
15.87 15.86 16.00 16.00 15.88 15.96 15.96 15.91
20
15
10
5
0
Q1‐2008 Q2‐2008 Q3‐2008 Q4‐2008 Q1‐2009 Q2‐2009 Q3‐2009 Q4‐2009
5
Detrended gov purchases as
percent of GDP, Britain30
21.14 21.19 21.19 21.30 21.10 21.17 21.18 21.2825
20
15
10
5
0
Q1‐2008 Q2‐2008 Q3‐2008 Q4‐2008 Q1‐2009 Q2‐2009 Q3‐2009 Q4‐2009
6
Detrended gov purchases as
percent of GDP, Japan30
25
17.92 17.64 17.51 17.63 17.67 17.63 17.57 17.6120
15
10
5
0
Q1‐2008 Q2‐2008 Q3‐2008 Q4‐2008 Q1‐2009 Q2‐2009 Q3‐2009 Q4‐2009
7
Detrended gov purchases as
percent of GDP, Germany30
25
17.94 18.03 18.00 18.15 18.38 18.48 18.58 18.5120
15
10
5
0
Q1‐2008 Q2‐2008 Q3‐2008 Q4‐2008 Q1‐2009 Q2‐2009 Q3‐2009 Q4‐2009
8
Detrended gov purchases as
percent of GDP, France30
23.06 23.09 23.18 23.26 23.31 23.41 23.52 23.5925
20
15
10
5
0
Q1‐2008 Q2‐2008 Q3‐2008 Q4‐2008 Q1‐2009 Q2‐2009 Q3‐2009 Q4‐2009
9
Detrended gov purchases as
percent of GDP, Greece30
25
17.01 17.00 17.41 17.0318.29 18.40 18.74 18.1120
15
10
5
0
Q1‐2008 Q2‐2008 Q3‐2008 Q4‐2008 Q1‐2009 Q2‐2009 Q3‐2009 Q4‐2009
10
Detrended gov purchases
60
80 Beginning of recession
Stimulus bill passed
40
Federal
0
20
007 do
llars
‐40
‐20
Billion
s of 2
0
Sum of Federal, State, and Local
‐60
‐40
‐100
‐80 State and Local
2007‐IV 2008‐I 2008‐II 2008‐III 2008‐IV 2009‐I 2009‐II 2009‐III 2009‐IV 2010‐I
11
Detrended transfers
100
150
200
250
300
Billion
s of 2
007 do
llars
Beginning of recession
Stimulus bill passed
Extra Government Benefits to Individuals
0
50
100
2007‐IV 2008‐I 2008‐II 2008‐III 2008‐IV 2009‐I 2009‐II 2009‐III 2009‐IV 2010‐I
12
Components of government
purchases
CategoryExtra spending, billions of 2007 dollars
Federal non-defense, non-capital 13.7
Federal non-defense, capital 3.6
Federal defense, non-capital 34.2
Federal defense, capital 14.4
State and local, non-capital -34.6
State and local, capital -8.5
13
Basic result
Spending Output Consumption
0 2 4 6
0
0.2
0.4
0.6
0.8
1
0 2 4 6−2
−1
0
1
2
0 2 4 6−1
−0.5
0
0.5
1
Investment Net exports Exchange rate
0 2 4 6−2
−1
0
1
0 2 4 6−2
−1
0
1
0 2 4 6
−6
−4
−2
0
2
4
Figure 1: Impulse responses to government spending shock: unconditional effects. Notes: quantitiesmeasured in output units; solid line: point estimate (shaded area:± one standard error); computation1000 simulations of estimated second stage model (assumingnormality).
Government spending Output Consumption
0 2 4 6−0.5
0
0.5
1
1.5
0 2 4 6−3
−2
−1
0
1
2
3
0 2 4 6−3
−2
−1
0
1
2
3
Investment Net exports Real exchange rate
0 2 4 6−3
−2
−1
0
1
0 2 4 6−2
−1
0
1
2
0 2 4 6−15
−10
−5
0
5
10
Figure 2: Impulse responses to government spending shock: baseline scenario vs peg. Notes: quan-tities measured in output units; solid line: point estimatefor baseline scenario (shaded area:± onestandard-error); dashed dotted line (dashed lines:± one standard error): deviation from baseline dueto peg; computation 1000 simulations of estimated second stage model (assuming normality).
14
Sampling errors in U.S. data
Period GDP multiplierConsumption
multiplier
0 1930-2008 0.55 -0.05
0(0.08) (0.03)
1 1948-2008 0.47 -0.12
1(0.28) (0.10)
2 1960-2008 0.13 -0.09
2(0.65) (0.29)
3 1939-1948 0.53 -0.05
3(0.07) (0.02)
4 1949-1955 0.48 -0.18
4(0.56) (0.05)
5 1939-1944 0.36 -0.11
5(0.10) (0.03)
6 1945-1949 0.39 -0.04
6 (0.08) (0.05)
15
Weights applied in U.S. data
0 15
0.20
0.25
0.30
0.35
0.40
Weight
0.00
0.05
0.10
0.15
1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
16
Result for financial crisis
Government spending Output Consumption
0 2 4 6−0.5
0
0.5
1
1.5
0 2 4 6−5
0
5
0 2 4 6−5
0
5
Investment Net exports Real exchange rate
0 2 4 6−5
−4
−3
−2
−1
0
1
0 2 4 6−4
−2
0
2
0 2 4 6−15
−10
−5
0
5
10
Figure 3: Impulse responses to government spending shock: baseline scenario vs fiscal stress. Notes:see figure 2.
Government spending Output Consumption
0 2 4 6−0.5
0
0.5
1
1.5
2
2.5
0 2 4 6
−4
−2
0
2
4
6
0 2 4 6
−4
−2
0
2
4
Investment Net exports Real exchange rate
0 2 4 6
−4
−2
0
2
4
0 2 4 6−6
−4
−2
0
2
0 2 4 6−20
−10
0
10
Figure 4: Impulse responses to government spending shock: baseline scenario vs banking/financialcrisis. Notes: see figure 2.
17
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