Using vector autoregressions on U.S. time series for 1957-79 and 1983-2004, we find government spending shocks to have stronger effects on output, consumption, and wages in the earlier period. We try to account for this observation within a DSGE model featuring price rigidities and limited asset market participation. Specifically, we estimate the structural parameters of the model for both periods by matching impulse responses. Model-based counterfactual experiments suggest that most of the changes in fiscal policy transmission are accounted for by increased asset market participation and the more active monetary policy of the Volcker-Greenspan period. Copyright (c) 2008 The Ohio State University.
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Volume (Year): 40 (2008) Issue (Month): 7 (October) Pages: 1439-1470 Download reference. The following formats are available: HTML
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