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On the size of fiscal multipliers: A counterfactual analysis

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  • Kuckuck, Jan
  • Westermann, Frank

Abstract

We point out that fiscal multipliers derived from SVAR-models include the predicted future path of policy instruments. After the initial shock, net taxes and government expenditures react to each other and are autocorrelated. In a counterfactual simulation, we report fiscal multipliers that abstract from these dynamic responses.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 123 (2014)
Issue (Month): 1 ()
Pages: 26-32

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Handle: RePEc:eee:ecolet:v:123:y:2014:i:1:p:26-32

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Fiscal policy; Government spending; Net revenues; Structural vector autoregression;

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  1. Andrew Mountford & Harald Uhlig, 2005. "What are the Effects of Fiscal Policy Shocks?," SFB 649 Discussion Papers SFB649DP2005-039, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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  12. Alan J. Auerbach & Yuriy Gorodnichenko, 2010. "Measuring the Output Responses to Fiscal Policy," NBER Working Papers 16311, National Bureau of Economic Research, Inc.
  13. Harald Uhlig, 2010. "Some Fiscal Calculus," American Economic Review, American Economic Association, vol. 100(2), pages 30-34, May.
  14. Davig, Troy & Leeper, Eric M., 2011. "Monetary-fiscal policy interactions and fiscal stimulus," European Economic Review, Elsevier, vol. 55(2), pages 211-227, February.
  15. Olivier Blanchard & Roberto Perotti, 1999. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," NBER Working Papers 7269, National Bureau of Economic Research, Inc.
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  17. Olivier J. Blanchard & Daniel Leigh, 2013. "Growth Forecast Errors and Fiscal Multipliers," NBER Working Papers 18779, National Bureau of Economic Research, Inc.
  18. Roberto Perotti, 2005. "Estimating the effects of fiscal policy in OECD countries," Proceedings, Federal Reserve Bank of San Francisco.
  19. Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. Végh, 2010. "How Big (Small?) are Fiscal Multipliers?," NBER Working Papers 16479, National Bureau of Economic Research, Inc.
  20. Perotti, Roberto, 2005. "Estimating the Effects of Fiscal Policy in OECD Countries," CEPR Discussion Papers 4842, C.E.P.R. Discussion Papers.
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