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The State-Level Nonlinear Effects of Government Spending Shocks in the US: The Role of Partisan Conflict

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journal contribution
posted on 2023-07-26, 16:01 authored by Xin Sheng, Rangan Gupta
Utilising a nonlinear (regime-switching) mixed-frequency panel vector autoregression model, we study the effects of government spending shocks in the United States (US) over the business cycle, while considering the role of partisan conflict. In particular, we investigate whether partisan conflict is relevant to the differences in fiscal spending multipliers in expansionary and recessionary business cycle phases upon the impact of annual government spending shocks, using quarterly state-level data covering 1950:Q1 to 2016:Q4. We find new evidence that fiscal multipliers can vary with economic and political conditions. The cumulated effects of government spending shocks are strong and persistent in recessions when the level of partisan conflict is low.

History

Refereed

  • Yes

Volume

14

Issue number

18

Page range

11299-11299

Publication title

Sustainability

ISSN

2071-1050

Publisher

MDPI AG

File version

  • Published version

Language

  • eng

Legacy posted date

2022-11-02

Legacy creation date

2022-10-14

Legacy Faculty/School/Department

Faculty of Business & Law