The Analytics of SVARs: A Unified Framework to Measure Fiscal Multipliers

Abstract

ticities implied by the identification schemes generate a large dispersion in the estimates of tax and spending multipliers. Second, I estimate fiscal multipliers consistent with prior distributions of the elasticities computed by a variety of empirical strategies, and by employing a simple dynamic stochastic general equilibrium model. I document three findings for the U.S. for the period 1947-2010. First, the impact tax multiplier is close to 0. Second, the impact spending multiplier ranges between 0.35 and 1. Third, there is a large uncertainty in the estimates of fiscal multipliers at longer horizons. Yet, the probability that the spending multiplier is larger than the tax multiplier is above 0.65, for up to three years after policy interventions.