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Title: Government Spending Multipliers under the Zero Lower Bound: Evidence from Japan

Author(s): Wataru Miyamoto, Thuy Lan Nguyen and Dmitriy Sergeyev

Publication Date: November 2016

Keyword(s): fiscal stimulus, government spending, multiplier and zero lower bound

Programme Area(s): Monetary Economics and Fluctuations

Abstract: Using a rich data set on government spending forecasts in Japan, we provide new evidence on the effects of unexpected changes in government spending when the nominal interest rate is near the zero lower bound (ZLB). The on-impact output multiplier is 1.5 in the ZLB period, and 0.6 outside of it. We argue that these results are not driven by the amount of slack in the economy. A simple New Keynesian model can reproduce some features of our empirical findings if the ZLB period is caused by a deflationary trap and government spending is not too persistent.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11633

Bibliographic Reference

Miyamoto, W, Nguyen, T and Sergeyev, D. 2016. 'Government Spending Multipliers under the Zero Lower Bound: Evidence from Japan'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11633