Non-Ricardian Aspects of Fiscal Policy in Chile
AbstractThis paper examines non-Ricardian effects of government spending shocks in the Chilean economy. We first provide evidence on those effects based on vector autoregressions. We then show that such evidence can be accounted for by a model that features: (i) a sizeable share of non-Ricardian households (i.e. households which do not make use of financial markets and just consume their current labor income); (ii) nominal price and wage rigidities; (iii) an inflation targeting scheme, and (iv) a structural balance fiscal rule that represents the particular Chilean fiscal rule. The model is estimated employing Bayesian techniques. Finally, we use model simulations to demonstrate the countercyclical effects of the Chilean fiscal rule as compared with a zero-deficit rule.
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Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 663.
Date of creation: Feb 2012
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- NEP-ALL-2012-02-27 (All new papers)
- NEP-CBA-2012-02-27 (Central Banking)
- NEP-MAC-2012-02-27 (Macroeconomics)
- NEP-PUB-2012-02-27 (Public Finance)
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- Carlos Garcia & Pablo Gonzalez & Antonio Moncado, 2010. "Proyecciones Macroeconómicas en Chile: Una Aproximación Bayesiana," ILADES-Georgetown University Working Papers inv262, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
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