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Fiscal Policy Shocks in the Euro Area and the US: An Empirical Assessment

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  • Pablo Burriel
  • Francisco de Castro
  • Daniel Garrote
  • Esther Gordo
  • Joan Paredes
  • Javier J. Pérez

Abstract

We analyse the impact of fiscal policy shocks in the euro area as a whole, using a newly available quarterly dataset of fiscal variables for the period 1981-2007. To allow for comparability with previous results on euro area countries and the US, we use a standard structural VAR framework, and study the impact of aggregated and disaggregated government spending and net taxes shocks. In addition, to frame euro area results, we apply the same methodology for the same sample period to US data. We also explore the sensitivity of the provided results to the inclusion of variables aiming at measuring “financial stress” (increases in risk) and “fiscal stress” (sustainability concerns). Analysing US and euro area data with a common methodology provides some interesting insights on the interpretation of fiscal policy shocks. JEL Classification: E62, H30.

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Bibliographic Info

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 31 (2010)
Issue (Month): 2 (06)
Pages: 251-285

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Handle: RePEc:ifs:fistud:v:31:y:2010:i:2:p:251-285

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Citations

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Cited by:
  1. Salotti, Simone & Marattin, Luigi, 2009. "On the usefulness of government spending in the EU area," MPRA Paper 19476, University Library of Munich, Germany.
  2. Gechert, Sebastian, 2012. "The multiplier principle, credit-money and time," MPRA Paper 34648, University Library of Munich, Germany.
  3. António Afonso & Ricardo M. Sousa, 2009. "The Macroeconomic Effects of Fiscal Policy in Portugal: a Bayesian SVAR Analysis," Working Papers 2009/09, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon..
  4. Ricco, Giovanni & Ellahie, Atif, 2012. "Government Spending Reloaded: Fundamentalness and Heterogeneity in Fiscal SVARs," MPRA Paper 42105, University Library of Munich, Germany.
  5. Raffaella Basile & Bruno Chiarini & Elisabetta Marzano, 2011. "Can we Rely upon Fiscal Policy Estimates in Countries with Unreported Production of 15 Per Cent (or more) of GDP?," CESifo Working Paper Series 3521, CESifo Group Munich.
  6. Baum, Anja & Koester, Gerrit B., 2011. "The impact of fiscal policy on economic activity over the business cycle - evidence from a threshold VAR analysis," Discussion Paper Series 1: Economic Studies 2011,03, Deutsche Bundesbank, Research Centre.
  7. Umut Unal, 2011. "Rethinking the Effects of Fiscal Policy on Macroeconomic Aggregates: A Disaggregated SVAR Analysis," Working Papers 1109, Florida International University, Department of Economics.
  8. Francisco de Castro & Daniel Garrote, 2012. "The effects of fiscal shocks on the exchange rate in the EMU and differences with the us," Banco de España Working Papers 1224, Banco de España.

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