Cross-Region Transfers in a Monetary Union
US federal transfers to individuals are large, countercyclical, vary geographically, and are often credited for helping stabilize regional economies. This paper estimates the short-run effects of these transfers using plausibly exogenous regional variation in temporary stimulus packages and earlier permanent Social Security increases. States that received larger transfers tended to grow faster contemporaneously, with a multiplier of around 1.5 for permanent transfers and 1/3 for temporary transfers. Results are broadly consistent with an open-economy New Keynesian model. At business-cycle frequencies, cross-region transfer multipliers are not large, suggesting only modest gains in regional stabilization from US federal automatic stabilizers.
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| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020-05
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| Subjects: | FISCAL MULTIPLIER, FISCAL TRANSFER, MONETARY UNION, FEDERAL TRANSFERS, REGIONAL DEVELOPMENT, STIMULUS PACKAGE, NEW KEYNESIAN MODEL, REGIONAL STABILIZATION, CORONAVIRUS, COVID-19, PANDEMIC RESPONSE, COUNTERCYCLICAL POLICY, |
| Online Access: | http://documents.worldbank.org/curated/en/486411589304789870/Cross-Region-Transfers-in-a-Monetary-Union-Evidence-from-the-US-and-Some-Implications https://hdl.handle.net/10986/33756 |
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| Summary: | US federal transfers to individuals are
large, countercyclical, vary geographically, and are often
credited for helping stabilize regional economies. This
paper estimates the short-run effects of these transfers
using plausibly exogenous regional variation in temporary
stimulus packages and earlier permanent Social Security
increases. States that received larger transfers tended to
grow faster contemporaneously, with a multiplier of around
1.5 for permanent transfers and 1/3 for temporary transfers.
Results are broadly consistent with an open-economy New
Keynesian model. At business-cycle frequencies, cross-region
transfer multipliers are not large, suggesting only modest
gains in regional stabilization from US federal automatic stabilizers. |
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