Government spending multipliers and public indebtedness: an investigation for the US.

• 발행기관: 한국재정학회(구 한국재정·공공경제학회)
• 저자명: Wongi Kim
• 간행물 정보: 『한국재정학회 학술대회 논문집』2015년도 추계학술대회 논문집, 1~54쪽, 전체 54쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2015.09.30

영문 초록

This paper examines the state-dependent effects of government debt on government spending mul-tipliers. In the first part of the paper, I estimate the spending multipliers conditional on the level of government debt using US historical data and the two-state direct projection method. For the estimation, a new quarterly US historical government debt series is constructed. Two important empirical results are obtained. First, in contrast to the conventional prediction, the estimated short-run multipliers in a high debt state are larger than those in a low debt state. Furthermore, I do not find strong evidence to support a sharp increase in interest rate and levying heavier future distortionary taxes, potential candidates which offset the stimulus effects of government spending, in response to a rise in government spending in a high debt state. Instead, I find evidence to sup-port that the government may try to stabilize debt levels by limiting debt-financed spending and subsequent spending cuts, so-called spending reversals, in a high debt state. In the second part, I construct a New Keynesian model to explain the large short-run multipliers in a high debt state. The empirical result reveals that spending reversals are observed only in a high debt state. Based on this empirical finding, I introduce a state-dependent government spending rule in the standard New Keynesian model. Specifically, spending reversals are assumed to take place only when the debt-to-GDP ratio exceeds a threshold. The model suggests that the state-dependent spending rule and the interaction between spending reversals and monetary policy could be a potential channel to understand the large short-run multipliers in a high debt state.

목차

1 Introduction

2 Data and econometric methods

3 Baseline results

4 Robustness

5 The large short-run multiplier in a high debt state:a New Keynesian lens

6 Concluding remarks

키워드

Government spending multiplier Government debt Local projection State depen-dency Spending reversals