The Missing Intercept: A Demand Equivalence Approach
Name
wolf-2023-the-missing-intercept-a-demand-equivalence-approach.pdf
Description
Published version
Size
776.46 KB
Format
Adobe PDF
Checksum (MD5)
31bd3e3ec289f4b96a516cfa47dd9711
Author(s)
Wolf, Christian K
Date Issued
August 2023
Journal
American Economic Review
Publisher
American Economic Association
Citation
Wolf, Christian K. 2023. "The Missing Intercept: A Demand Equivalence Approach." American Economic Review 113 (8): 2232–69.
Version
Final published version
Abstract
I give conditions under which changes in private spending are accommodated in general equilibrium exactly like changes in aggregate fiscal expenditure. Under such demand equivalence, researchers can use time series evidence on fiscal multipliers to recover the general equilibrium “missing intercept” of shocks to private spending identified in the cross section. Through the lens of this theory, time series estimates of a fiscal multiplier around one suggest a missing intercept close to zero—an observation that I illustrate with an application to the 2008 tax rebates. I also discuss the robustness of this aggregation approach to plausible violations of demand equivalence. (JEL E12, E21, E24, E62, G51, H24, H31)
MIT Department
Massachusetts Institute of Technology. Department of Economics
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
10.1257/aer.20211751
