Time Varying Fiscal Multipliers in Germany
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Tim Oliver Berg
Abstract
This paper provides novel evidence on the time varying impact of government spending shocks on output in Germany over the years 1970 to 2013. In a first step, I use an expectations-augmented vector autoregressive model with time varying parameters (TVP-VAR) to show that fiscal multipliers are not stable over time but exhibit a ushaped pattern. While multipliers fluctuate around 2 at the beginning and end of the sample, they are much smaller in between. In a second step, I discuss which factors determine the magnitude of German multipliers and hence explain the observed variation. It turns out that fiscal policy is more effective when business uncertainty is high but less in periods of financial market stress, while the state of the business cycle is of minor importance. Moreover, I find that fiscal sustainability is a crucial determinant of the multipliers. I conclude that policy recommendations based on average multipliers are misleading.
© 2015 by Lucius & Lucius, Stuttgart
Articles in the same Issue
- Contents
- What Caused the Great Recession?
- Time Varying Fiscal Multipliers in Germany
- Planned Fiscal Consolidations and Growth Forecast Errors – New Panel Evidence on Fiscal Multipliers
- Nowcasting Regional GDP: The Case of the Free State of Saxony
- Determinants of house price dynamics. What can we learn from search engine data?
Articles in the same Issue
- Contents
- What Caused the Great Recession?
- Time Varying Fiscal Multipliers in Germany
- Planned Fiscal Consolidations and Growth Forecast Errors – New Panel Evidence on Fiscal Multipliers
- Nowcasting Regional GDP: The Case of the Free State of Saxony
- Determinants of house price dynamics. What can we learn from search engine data?
