Seminar Cross-sectional identification with heterogeneous exposure to general-equilibrium effects Add to calendar 2026-01-22 11:00 2026-01-22 12:15 Europe/Rome Cross-sectional identification with heterogeneous exposure to general-equilibrium effects Conference Room Villa La Fonte YYYY-MM-DD Print Share: Share on Facebook Share on BlueSky Share on X Share on LinkedIn Send by email Scheduled dates Jan 22 2026 11:00 - 12:15 CET Conference Room, Villa La Fonte Organised by Department of Economics This event features a discussion with Paula Donaldson (UC San Diego). Cross-sectional designs that exploit heterogeneous exposure to aggregate shocks while controlling for time fixed effects are widely used to estimate elasticities of macroeconomic importance, such as cross-sectional fiscal multipliers. I show that these designs fail to identify partial-equilibrium elasticity when exposure to the shock of interest is correlated with exposure to other aggregate variables that move in general equilibrium. I develop a test for this identification failure and propose a new decomposition method that leverages both cross-sectional and time-series variation to recover elasticities purged of general equilibrium effects. Applying the method to estimate US cross-sectional fiscal multipliers, I find that accounting for the general equilibrium effects operating through monetary policy reduces the estimated two-year multiplier from 1.5 to 1. This result shows that monetary policy can bias cross-sectional fiscal multiplier estimates and demonstrates the need for cross-sectional identification strategies that account for heterogeneity in responses to general-equilibrium forces.