TY - JOUR
T1 - The Government Spending Multiplier in a Multisector Economy
AU - Bouakez, Hafedh
AU - Rachedi, O.
AU - Santoro, Emiliano
N1 - Funding Information:
* Bouakez: HEC Montréal and CIREQ (email: [email protected]); Rachedi: ESADE Business School, Universitat Ramon Llull (email: [email protected]); Santoro: University of Copenhagen (email: emiliano. [email protected]). Giorgio Primiceri was coeditor for this article. We thank three anonymous referees for helpful comments and suggestions. We are also grateful to Henrique S. Basso, Florin Bilbiie, Oleksiy Kryvtsov, Jesper Linde, Ramon Marimon, Isabelle Mejean, Luca Metelli, Michael Reiter, Michael Weber, Roland Winkler, and seminar participants at Lancaster University, Banco de España, Latvijas Banka, the Midwest Macro Meetings in Nashville, the Macro Banking and Finance Workshop in Alghero, the Conference of the ESCB Research Cluster 2 in Paris, the Joint French Macro Workshop in Paris, the SNDE Conference in Dallas, the Conference on Theories and Methods in Macroeconomics in Nuremberg, the Africa Meeting of the Econometric Society in Rabat, the Workshop on Recent Developments in Macroeconomic Modelling in Barcelona, the Macro Workshop in Pamplona, the Dynare Conference in Lausanne, and the SAEe Meetings in Alicante for useful comments. Financial support from SSHRC, FRQSC, and the HEC Montréal Foundation is gratefully acknowledged.
Publisher Copyright:
© 2023, American Economic Journal: Macroeconomics. All Rights Reserved.
PY - 2023/1
Y1 - 2023/1
N2 - We study the effects of aggregate government spending shocks in a production network economy where sectors differ in their price rigidity, factor intensities, use of intermediate inputs, and contribution to final demand. The model implies an aggregate value-added multiplier that is 75 percent (and $0.32) larger than that obtained in the average one-sector economy. This amplification is mainly driven by input– output linkages and—to a lesser extent—sectoral heterogeneity in price rigidity. Aggregate government spending shocks also lead to heterogeneous responses of sectoral value added, which are larger among upstream industries. We present novel empirical evidence supporting this prediction.
AB - We study the effects of aggregate government spending shocks in a production network economy where sectors differ in their price rigidity, factor intensities, use of intermediate inputs, and contribution to final demand. The model implies an aggregate value-added multiplier that is 75 percent (and $0.32) larger than that obtained in the average one-sector economy. This amplification is mainly driven by input– output linkages and—to a lesser extent—sectoral heterogeneity in price rigidity. Aggregate government spending shocks also lead to heterogeneous responses of sectoral value added, which are larger among upstream industries. We present novel empirical evidence supporting this prediction.
KW - Capital reallocation
KW - Fiscal multipliers
KW - Linkages
KW - Monetary-policy
KW - Production networks
KW - Propagation
KW - Rise
KW - Shocks
KW - Transmission
UR - http://www.scopus.com/inward/record.url?scp=85163326930&partnerID=8YFLogxK
U2 - 10.1257/mac.20200213
DO - 10.1257/mac.20200213
M3 - Article
AN - SCOPUS:85163326930
SN - 1945-7707
VL - 15
SP - 209
EP - 239
JO - American Economic Journal: Macroeconomics
JF - American Economic Journal: Macroeconomics
IS - 1
ER -