Asymmetric Effects of Government Spending: Does the Level of Real Interest Rates Matter?
AbstractThis paper empirically explores how fiscal policy (represented by increases in government spending) has asymmetric effects on economic activity across different levels of real interest rates. It suggests that the effect of fiscal policy depends on the level of real rates because the Ricardian effect is smaller at lower financin costs of fiscal policy. Using threshold vector autoregression models on U.S. data, the paper provides new evidence that expansionary government spending is more conducive to short-term growth when real rates are low. It also finds asymmetric effects on interest rates and inflation and threshold effects associated with substitution between financing methods. Copyright 2006, International Monetary Fund
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal IMF Staff Papers.
Volume (Year): 53 (2006)
Issue (Month): si ()
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Other versions of this item:
- Michael B. Devereux & Woon Gyu Choi, 2004. "Asymmetric Effects of Government Spending: Does the Level of Real Interest Rates Matter?," Econometric Society 2004 Far Eastern Meetings 666, Econometric Society.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barro, Robert J, 1981.
"Output Effects of Government Purchases,"
Journal of Political Economy,
University of Chicago Press, vol. 89(6), pages 1086-1121, December.
- Woon Gyu Choi, 2007.
"Measuring Interest Rates as Determined by Thrift and Productivity,"
Annals of Economics and Finance,
Society for AEF, vol. 8(1), pages 167-195, May.
- Choi, Woon Gyu & Wen, Yi, 2000. "Measuring Interest Rates as Determined by Thrift and Productivity," Working Papers 00-03, Cornell University, Center for Analytic Economics.
- Woon Gyu Choi & Yi Wen, 2005. "Measuring interest rates as determined by thrift and productivity," Working Papers 2005-037, Federal Reserve Bank of St. Louis.
- Daniel Choi & Mark Holmes, 2014. "Budget deficits and real interest rates: a regime-switching reflection on Ricardian Equivalence," Journal of Economics and Finance, Springer, vol. 38(1), pages 71-83, January.
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