TY - BOOK ID - 65575987 TI - The Euro-Area Government Spending Multiplier at the Effective Lower Bound AU - Amendola, Adalgiso. AU - di Serio, Mario. AU - Fragetta, Matteo. AU - Melina, Giovanni. PY - 2019 SN - 149832293X 1498314945 1498322913 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Banks and Banking KW - Macroeconomics KW - Money and Monetary Policy KW - Public Finance KW - Time-Series Models KW - Dynamic Quantile Regressions KW - Dynamic Treatment Effect Models KW - Diffusion Processes KW - State Space Models KW - Multiple or Simultaneous Equation Models: Models with Panel Data KW - Classification Methods KW - Cluster Analysis KW - Principal Components KW - Factor Models KW - Fiscal Policy KW - National Government Expenditures and Related Policies: General KW - Interest Rates: Determination, Term Structure, and Effects KW - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) KW - Public finance & taxation KW - Monetary economics KW - Economic growth KW - Banking KW - Expenditure KW - Interest rate floor KW - Business cycles KW - Central bank policy rate KW - Fiscal multipliers KW - Monetary policy KW - Financial services KW - Fiscal policy KW - Expenditures, Public KW - Interest rates KW - United States UR - https://www.unicat.be/uniCat?func=search&query=sysid:65575987 AB - We build a factor-augmented interacted panel vector-autoregressive model of the Euro Area (EA) and estimate it with Bayesian methods to compute government spending multipliers. The multipliers are contingent on the overall monetary policy stance, captured by a shadow monetary policy rate. In the short run (one year), whether the fiscal shock occurs when the economy is at the effective lower bound (ELB) or in normal times does not seem to matter for the size of the multiplier. However, as the time horizon increases, multipliers diverge across the two regimes. In the medium run (three years), the average multiplier is about 1 in normal times and between 1.6 and 2.8 at the ELB, depending on the specification. The difference between the two multipliers is distributed largely away from zero. More generally, the multiplier is inversely correlated with the level of the shadow monetary policy rate. In addition, we verify that EA data lend support to the view that the multiplier is larger in periods of economic slack, and we show that the shadow rate and the state of the business cycle are autonomously correlated with its size. The econometric approach deals with several technical problems highlighted in the empirical macroeconomic literature, including the issues of fiscal foresight and limited information. ER -