Fiscal stimulus in a monetary union: Evidence from US regions

American Economic Review

Volumn 104, Issue 3, 2014, Pages 753-792

  Nakamura, Emi ^a   Steinsson, Jón ^a  

^a Och Spine at New York Presbyterian Hospitals   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 84896950361     PISSN: 00028282     EISSN: None     Source Type: Journal    
DOI: 10.1257/aer.104.3.753     Document Type: Article

References (96)

1. Acconcia, Antonio, Giancarlo Corsetti, and Saverio Simonelli. 2011. "Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment." Centre for Economic Policy Research Discussion Paper 8305.
2. Aguiar, Mark, and Erik Hurst. 2005. "Consumption versus Expenditure." Journal of Political Economy 113 (5): 919-48.
3. Aguiar, Mark, Erik Hurst, and Loukas Karabarbounis. 2013. "Time Use during the Great Recession." American Economic Review 103 (5): 1664-96.
4. Alesina, Alberto, and Silvia Ardagna. 2010. "Large Changes in Fiscal Policy: Taxes versus Spending." In Tax Policy and the Economy. Vol. 24, edited by Jeffrey R. Brown, 35-68. Chicago: University of Chicago Press.
5. Altig, David, Lawrence J. Christiano, Martin Eichenbaum, and Jesper Linde. 2011. "Firm-Specific Capital, Nominal Rigidities and the Business Cycle." Review of Economic Dynamics 14 (2): 225-47.
6. American Chamber of Commerce Realtors Association. 1995-2006. "ACCRA Historical Cost of Living Index." http://www.coli.org/StoreHistorical.asp (accessed November 2010).
7. Auerbach, Alan J., and Yuriy Gorodnichenko. 2012. "Measuring the Output Responses to Fiscal Policy." American Economic Journal: Economic Policy 4 (2): 1-27.
8. Backus, David K., Patrick J. Kehoe, and Finn E. Kydland. 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?" American Economic Review 84 (1): 84-103.
9. Backus, David K., and Gregor W. Smith. 1993. "Consumption and Real Exchange Rates in Dynamic Economies with Non-traded Goods." Journal of International Economics 35 (3-4): 297-316.
10. Bansal, Ravi, and Amir Yaron. 2004. "Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles." Journal of Finance 59 (4): 1481-509.
11. Barro, Robert J., and Charles J. Redlick. 2011. "Macroeconomic Effects from Government Purchases and Taxes." Quarterly Journal of Economics 126 (1): 51-102.
12. Bartik, Timothy J. 1991. Who Benefits from State and Local Economic Development Policies? Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.
13. Baxter, Marianne, and Robert G. King. 1993. "Fiscal Policy in General Equilibrium." American Economic Review 83 (3): 315-34.
14. Benigno, Gianluca, and Pierpaolo Benigno. 2003. "Price Stability in Open Economies." Review of Economic Studies 70 (4): 743-64.
15. Bilbiie, Florin O. 2011. "Nonseparable Preferences, Frisch Labor Supply, and the Consumption Multiplier of Government Spending: One Solution to a Fiscal Policy Puzzle." Journal of Money, Credit, and Banking 43 (1): 221-51.
16. Blanchard, Olivier, and Roberto Perotti. 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output." Quarterly Journal of Economics 117 (4): 1329-68.
17. Blanchard, Olivier Jean, and Lawrence F. Katz. 1992. "Regional Evolutions." Brookings Papers on Economic Activity (1): 1-61.
18. Braddon, Derek. 1995. "The Regional Impact of Defense Expenditure." In Handbook of Defense Economics. Vol. 1, edited by Keith Hartley and Todd Sandler, 491-521. Amsterdam: Elsevier Science, North-Holland.
19. Bureau of Economic Analysis. 1969-2006a. "Annual State Personal Income and Employment by State." United States Department of Commerce (accessed October 2009).
20. Bureau of Economic Analysis. 1966-2006b. "Gross Domestic Product by State." United States Department of Commerce (accessed October 2009).
21. Bureau of Labor Statistics. 1966-2006a. "Consumer Price Index." United States Department of Labor (accessed October 2009).
22. Bureau of Labor Statistics. 1966-2006b. "Current Employment Survey." United States Department of Labor (accessed October 2009).
23. Burnside, Craig, Martin Eichenbaum, and Jonas D. M. Fisher. 2004. "Fiscal Shocks and Their Consequences." Journal of Economic Theory 115 (1): 89-117.
24. Calvo, Guillermo A. 1983. "Staggered Prices in a Utility-Maximizing Framework." Journal of Monetary Economics 12 (3): 383-98.
25. Canova, Fabio, and Evi Pappa. 2007. "Price Differentials in Monetary Unions: The Role of Fiscal Shocks." Economic Journal 117 (520): 713-37.
26. Chari, V. V., Patrick J. Kehoe, and Ellen R. McGrattan. 2002. "Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?" Review of Economic Studies 69 (3): 533-63.
27. Chetty, Raj, Adam Guren, Day Manoli, and Andrea Weber. 2011. "Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins." American Economic Review 101 (3): 471-75.
28. Chodorow-Reich, Gabriel, Laura Feiveson, Zachary Liscow, and William Gui Woolston. 2012. "Does State Fiscal Relief during Recessions Increase Employment? Evidence from the American Recovery and Reinvestment Act." American Economic Journal: Economic Policy 4 (3): 118-45.
29. Christiano, Lawrence, Martin Eichenbaum, and Sergio Rebelo. 2011. "When Is the Government Spending Multiplier Large?" Journal of Political Economy 119 (1): 78-121.
30. Christiano, Lawrence J., Martin Eichenbaum, and Charles L. Evans. 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy." Journal of Political Economy 113 (1): 1-45.
31. Clarida, Richard, Jordi Galí, and Mark Gertler. 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory." Quarterly Journal of Economics 115 (1): 147-80.
32. Clemens, Jeffrey, and Stephen Miran. 2012. "Fiscal Policy Multipliers on Subnational Government Spending." American Economic Journal: Economic Policy 4 (2): 46-68.
33. Cochrane, John H. 2005. Asset Pricing. 2nd ed. Princeton: Princeton University Press.
34. Cogan, John F., Tobias Cwik, John B. Taylor, and Volker Wieland. 2010. "New Keynesian versus Old Keynesian Government Spending Multipliers." Journal of Economic Dynamics and Control 34 (3): 281-95.
35. Cohen, Lauren, Joshua Coval, and Christopher Malloy. 2011. "Do Powerful Politicians Cause Corporate Downsizing?" Journal of Political Economy 119 (6): 1015-60.
36. Corsetti, Giancarlo, Keith Kuester, and Gernot J. Muller. 2011. "Floats, Pegs and the Transmission of Fiscal Policy." Unpublished.
37. Corsetti, Giancarlo, Andre Meier, and Gernot J. Muller. 2012. "Fiscal Stimulus with Spending Reversals." Review of Economics and Statistics 94 (4): 878-95.
38. Cragg, John G., and Stephen G. Donald. 1993. "Testing Identifiability and Specification in Instrumental Variable Models." Econometric Theory 9 (2): 222-40.
39. Davis, Steven J., Prakash Loungani, and Ramamohan Mahidhara. 1997. "Regional Labor Fluctuations: Oil Shocks, Military Spending, and other Driving Forces." Unpublished.
40. Del Negro, Marco. 1998a. "Aggregate Risk Sharing Across US States and Across European Countries." Unpublished.
41. Del Negro, Marco. 1998b. "Aggregate Risk Sharing Across US States and Across European Countries: Dataset." Unpublished.
42. Department of Defense. 1966-2006. "Procurement Reports and Data Files for Download, 1966-2006." http://siadapp.dmdc.osd.mil/procurement/ Procurement.html (accessed October 2009).
43. Drautzburg, Thorsten, and Harald Uhlig. 2011. "Fiscal Stimulus and Distortionary Taxation." Unpublished.
44. Edelberg, Wendy, Martin Eichenbaum, and Jonas D. M. Fisher. 1999. "Understanding the Effects of a Shock to Government Purchases." Review of Economic Dynamics 2 (1): 166-206.
45. Eggertsson, Gauti B. 2010. "What Fiscal Policy is Effective at Zero Interest Rates?" Unpublished.
46. Eichenbaum, Martin, and Jonas D. M. Fisher. 2007. "Estimating the Frequency of Price Re-optimization in Calvo-Style Models." Journal of Monetary Economics 54 (7): 2032-47.
47. Farhi, Emmanuel, and Ivan Werning. 2012. "Fiscal Multipliers: Liquidity Traps and Currency Unions." Unpublished.
48. Federal Reserve Economic Data. 1966-2006a. "Federal Funds Rate." Federal Reserve Bank of St. Louis (accessed March 2011).
49. Federal Reserve Economic Data. 1966-2006b. "Spot Oil Price: West Texas Intermediate." Federal Reserve Bank of St. Louis (accessed October 2010).
50. Fishback, Price V., William C. Horrace, and Shawn Kantor. 2005. "Did New Deal Grant Programs Stimulate Local Economies: A Study of Federal Grants and Retail Sales during the Great Depression." Journal of Economic History 65 (1): 36-71.
51. Fishback, Price V., and Valentina Kachanovskaya. 2010. "In Search of the Multiplier for Federal Spending in the States During the New Deal." National Bureau of Economic Research Working Paper 16561.
52. Fisher, Jonas D. M., and Ryan Peters. 2010. "Using Stock Returns to Identify Government Spending Shocks." Economic Journal 120 (544): 414-36.
53. Galí, Jordi, J. David López-Salido, and Javier Valles. 2007. "Understanding the Effects of Government Spending on Consumption." Journal of the European Economic Association 5 (1): 227-70.
54. Galí, Jordi, and Tommaso Monacelli. 2008. "Optimal Monetary and Fiscal Policy in Currency Union." Journal of International Economics 76 (1): 116-32.
55. Gordon, Robert J., and Robert Krenn. 2010. "The End of the Great Depression 1939-41: Policy Contributions and Fiscal Multipliers." National Bureau of Economic Research Working Paper 16380.
56. Greenwood, Jeremy, Zvi Hercowitz, and Gregory W. Huffman. 1988. "Investment, Capacity Utilization, and the Real Business Cycle." American Economic Review 78 (3): 402-17.
57. Gruber, Jonathan. 2006. "A Tax-Based Estimate of the Elasticity of Intertemporal Substitution." National Bureau of Economic Research Working Paper 11945.
58. Hall, Robert E. 1988. "Intertemporal Substitution in Consumption." Journal of Political Economy 96 (2): 339-57.
59. Hall, Robert E. 2009. "By How Much Does GDP Rise If the Government Buys More Output?" Brookings Papers on Economic Activity 2: 183-231.
60. Hillberry, Russell, and David Hummels. 2003. "Intranational Home Bias: Some Explanations." Review of Economics and Statistics 85 (4): 1089-92.
61. Hooker, Mark A., and Michael M. Knetter. 1997. "The Effects of Military Spending on Economic Activity: Evidence from State Procurement Spending." Journal of Money, Credit, and Banking 29 (3): 400-21.
62. Ilzetzki, Ethan, Enrique G. Mendoza, and Carlos A. Vegh. 2013. "How Big (Small?) Are Fiscal Multipliers?" Journal of Monetary Economics 60 (2): 239-54.
63. Jaimovich, Nir, and Sergio Rebelo. 2009. "Can News about the Future Drive the Business Cycle?" American Economic Review 99 (4): 1097-118.
64. King, Robert G., Charles I. Plosser, and Sergio T. Rebelo. 1988. "Production, Growth and Business Cycles: I. The Basic Neoclassical Model." Journal of Monetary Economics 21 (2/3): 195-232.
65. Kraay, Aart. 2012. "How Large Is the Government Spending Multiplier? Evidence from World Bank Lending." Quarterly Journal of Economics 127 (2): 829-87.
66. Mertens, Karel, and Morten O. Ravn. 2010. "Fiscal Policy in an Expectations Driven Liquidity Trap." Centre for Economic Policy Research Discussion Paper 7931.
67. Mintz, Alex, ed. 1992. The Political Economy of Military Spending in the United States. New York: Routledge.
68. Monacelli, Tommaso, and Roberto Perotti. 2008. "Fiscal Policy, Wealth Effects, and Markups." National Bureau of Economic Research Working Paper 14584.
69. Mountford, Andrew, and Harald Uhlig. 2009. "What Are the Effects of Fiscal Policy Shocks?" Journal of Applied Econometrics 24 (6): 960-92.
70. Murtazashvili, Irina, and Jeffrey M. Wooldridge. 2008. "Fixed Effects Instrumental Variables Estimation in Correlated Random Coefficient Panel Data Models." Journal of Econometrics 142 (1): 539-52.
71. Nakamura, Emi, Jón Steinsson. 2014. "Fiscal Stimulus in a Monetary Union: Evidence from US Regions: Dataset." American Economic Review. http://dx.doi.org/10.1257/aer.104.3.753.
72. Nakamura, Emi, Jón Steinsson, Robert Barro, and Jose Ursua. 2013. "Crises and Recoveries in an Empirical Model of Consumption Disasters." American Economic Journal: Macroeconomics 5 (3): 35-74.
73. Nekarda, Christopher J., and Valerie A. Ramey. 2011. "Industry Evidence on the Effects of Government Spending." American Economic Journal: Macroeconomics 3 (1): 36-59.
74. Obstfeld, Maurice, and Kenneth Rogoff. 1995. "Exchange Rate Dynamics Redux." Journal of Political Economy 103 (3): 624-60.
75. Obstfeld, Maurice, and Kenneth S. Rogoff. 2005. "Global Current Account Imbalances and Exchange Rate Adjustments." Brookings Papers on Economic Activity 1: 67-123.
76. Ohanian, Lee E. 1997. "The Macroeconomic Effects of War Finance in the United States: World War II and the Korean War." American Economic Review 87 (1): 23-40.
77. Parsley, David C., and Shang-Jin Wei. 1996. "Convergence to the Law of One Price without Trade Barriers or Currency Fluctuations." Quarterly Journal of Economics 111 (4): 1211-36.
78. Perotti, Roberto. 2008. "In Search of the Transmission Mechanism of Fiscal Policy." In National Bureau of Economic Research Annual 2007. Vol. 22, edited by Daron Acemoglu, Kenneth Rogoff, and Michael Woodford, 169-226. Chicago: University of Chicago Press.
79. Ramey, Valerie A. 2011. "Identifying Government Spending Shocks: It's All in the Timing." Quarterly Journal of Economics 126 (1): 1-50.
80. Ramey, Valerie A., and Matthew D. Shapiro. 1998. "Costly Capital Reallocation and the Effects of Government Spending." Carnegie-Rochester Conference Series on Public Policy 48 (1): 145-94.
81. Romer, Christina, and Jared Bernstein. 2009. "The Job Impact of the American Recovery and Reinvestment Plan." Washington, DC: Council of Economic Advisers.
82. Schmitt-Grohe, Stephanie, and Martin Uribe. 2012. "What's News in Business Cycles." Econometrica 80 (6): 2733-64.
83. Serrato, Juan Carlos Suarez, and Philippe Wingender. 2010. "Estimating Local Fiscal Multipliers." Unpublished.
84. Shoag, Daniel. 2010. "The Impact of Government Spending Shocks: Evidence on the Multiplier from State Pension Plan Returns." Unpublished.
85. Sims, Christopher A. 2001. "Solving Linear Rational Expectations Models." Computational Economics 20 (1-2): 1-20.
86. Stock, James H., Jonathan H. Wright, and Motohiro Yogo. 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments." Journal of Business and Economic Statistics 20 (4): 518-29.
87. Stock, James H., and Motohiro Yogo. 2005. "Testing for Weak Instruments in Linear IV Regression." In Identification and Inference for Econometric Models: Essays in Honor of Thomas Rothenberg, edited by Donald W.K. Andrews and James H. Stock, 80-108. Cambridge, UK: Cambridge University Press.
88. Taylor, John B. 1993. "Discretion versus Policy Rules in Practice." Carnegie-Rochester Conference Series on Public Policy 39 (1): 195-214.
89. Taylor, John B. 1999. "Staggered Price and Wage Setting in Macroeconomics." In Handbook of Macroeconomics. Vol. 1, edited by J. B. Taylor and M. Woodford, 1009-50. Amsterdam: Elsevier Science, North-Holland.
90. US Census Bureau. 1963-1983. Current Industrial Reports. MA-175, Shipments of Defense-Oriented Industries. Washington, DC: United States Department of Commerce.
91. US Census Bureau. 1966-2006. "Population by State." United States Department of Commerce (accessed October 2009).
92. Werning, Ivan. 2012. "Managing a Liquidity Trap: Monetary and Fiscal Policy." Unpublished.
93. Wilson, Daniel J. 2012. "Fiscal Spending Jobs Multipliers: Evidence from the 2009 American Recovery and Reinvestment Act." American Economic Journal: Economic Policy 4 (3): 251-82.
94. Woodford, Mike. 2003. Interest and Prices. Princeton, NJ: Princeton University Press.
95. Woodford, Michael. 2005. "Firm-Specific Capital and the New Keynesian Phillips Curve." International Journal of Central Banking 1 (2): 1-46.
96. Woodford, Michael. 2011. "Simple Analytics of the Government Expenditure Multiplier." American Economic Journal: Macroeconomics 3 (1): 1-35.