Fiscal Stimulus in a Monetary Union: Evidence from U.S. Regions

No 17391, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use rich historical data on military procurement spending across U.S. regions to estimate the effects of government spending in a monetary union. Aggregate military build-ups and draw- downs have differential effects across regions. We use this variation to estimate an "open economy relative multiplier" of approximately 1.5. We develop a framework for interpreting this estimate and relating it to estimates of the standard closed economy aggregate multiplier. The closed economy aggregate multiplier is highly sensitive to how strongly aggregate monetary and tax policy "leans against the wind." In contrast, our open economy relative multiplier "differences out" these effects because different regions in the union share a common monetary and tax policy. Our estimates provide evidence in favor of models in which demand shocks can have large effects on output.

JEL-codes: E32 E62 (search for similar items in EconPapers)
Date: 2011-09
New Economics Papers: this item is included in nep-cba and nep-mac
Note: EFG IFM ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

Published as Emi Nakamura & J?n Steinsson, 2014. "Fiscal Stimulus in a Monetary Union: Evidence from US Regions," American Economic Review, American Economic Association, vol. 104(3), pages 753-92, March.

Downloads: (external link)
http://www.nber.org/papers/w17391.pdf (application/pdf)

Related works:
Journal Article: Fiscal Stimulus in a Monetary Union: Evidence from US Regions (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:17391

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17391

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().