Natural Disasters, Government Spending, and the Fiscal Multiplier

Jan Fidrmuc, Sugata Ghosh and Weonho Yang

No 5665, CESifo Working Paper Series from CESifo

Abstract: We estimate the fiscal multiplier associated with shocks to government spending. We consider increases in government spending in the U.S. states in the wake of natural disasters to capture spending shocks that are both unexpected and unrelated to the preceding state of the economy. We find that these have a powerful stimulating effect on the local economy, which is reflected in the value taken by the fiscal multiplier. This result is obtained when we identify fiscal shocks by the states’ own exposure to natural disasters, or when we use nearby states’ exposure to disasters instead.

Keywords: natural disasters; government spending; fiscal multiplier; U.S. states (search for similar items in EconPapers)
JEL-codes: E22 E62 H30 H50 H72 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5665

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