The composition of government spending and the multiplier at the zero lower bound

•We use a New Keynesian model to investigate the government spending multiplier in a liquidity trap.•The multiplier at the ZLB depends crucially on the composition of the fiscal package.•Substitutable and productive government spending reduce the multiplier.•Under the ARRA specification the multiplier is lower than 1.

We investigate the size of the multiplier at the ZLB in a New Keynesian model. It ranges from around −0.25 to +1.5, depending on the extent to which the government spending is productive, substitutable or not for private consumption.