Citation

Discussion Paper Details

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Title: Should we trust cross sectional multiplier estimates?

Author(s): Fabio Canova

Publication Date: October 2020

Keyword(s): Cross sectional methods, dynamic heterogeneity, fiscal multipliers, Monetary pass-through and partial pooling

Programme Area(s): International Macroeconomics and Finance, Monetary Economics and Fluctuations and Public Economics

Abstract: I examine the properties of cross sectional estimates of multipliers, elasticities, or pass-throughs when the data is generated by a conventional multi-unit time series specification. A number of important biases plague estimates; the most relevant one occurs when the cross section is not dynamic homogenous. I suggest methods that can deal with this problem and show the magnitude of the biases cross sectional estimators display in an experimental setting. I contrast average time series and average cross sectional estimates of local fiscal multipliers for US states.

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Bibliographic Reference

Canova, F. 2020. 'Should we trust cross sectional multiplier estimates?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15330