Journal Article
The Local-Spillover Decomposition of an Aggregate Causal Effect
Abstract: This article presents a method to decompose the causal effects of U.S. defense spending on income into a local effect and a spillover effect using panel data. We estimate positive local and spillover multipliers. By construction, the sum provides an estimate of the aggregate multiplier, which is slightly greater than one in our benchmark specification. Using disaggregate data improves precision relative to using aggregate data alone. More generally, we provide a template to conduct inference on local, spillover, and aggregate causal effects in a unified framework.
JEL Classification: E1;
https://doi.org/10.20955/r.2026.06
Access Documents
File(s):
File format is text/html
https://www.stlouisfed.org/publications/review/2026/jun/local-spillover-decomposition-of-aggregate-causal-effect
Description: Landing page
File(s):
File format is application/pdf
https://www.stlouisfed.org/-/media/project/frbstl/stlouisfed/publications/review/pdfs/2026/jun/local-spillover-decomposition-of-aggregate-causal-effect.pdf
Description: Full text
Bibliographic Information
Provider: Federal Reserve Bank of St. Louis
Part of Series: Review
Publication Date: 2026-06-05