Fiscal Stimulus in a Monetary Union: Evidence from U.S. Regions

  title={Fiscal Stimulus in a Monetary Union: Evidence from U.S. Regions},
  author={Emi Nakamura and J{\'o}n Bjarni Steinsson},
  journal={NBER Working Paper Series},
We use rich historical data on military procurement spending across U.S. regions to estimate the effects of government spending in a monetary union. Aggregate military build-ups and draw- downs have differential effects across regions. We use this variation to estimate an "open economy relative multiplier" of approximately 1.5. We develop a framework for interpreting this estimate and relating it to estimates of the standard closed economy aggregate multiplier. The closed economy aggregate… 

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