What is the Importance of Monetary and Fiscal Shocks in Explaining US Macroeconomic Fluctuations?
AbstractThis paper analyzes the importance of monetary and fiscal policy shocks in explaining US macroeconomic fluctuations, and establishes new stylized facts. The novelty of our empirical analysis is that we jointly consider both monetary and fiscal policy, whereas the existing literature only focuses on either one or the other. Our main findings are twofold: fiscal shocks are relatively more important in explaining medium cycle fluctuations whereas monetary policy shocks are relatively more important in explaining business cycle fluctuations; and failing to recognize that both monetary and fiscal policy simultaneously affect macroeconomic variables might incorrectly attribute the fluctuations to the wrong source.
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Bibliographic InfoPaper provided by Duke University, Department of Economics in its series Working Papers with number 11-02.
Date of creation: 2011
Date of revision:
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Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
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Monetary policy; government spending; fiscal policy; business cycle fluctuations; medium cycle;
Other versions of this item:
- Barbara Rossi & Sarah Zubairy, 2011. "What Is the Importance of Monetary and Fiscal Shocks in Explaining U.S. Macroeconomic Fluctuations?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(6), pages 1247-1270, 09.
- E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-25 (All new papers)
- NEP-CBA-2011-06-25 (Central Banking)
- NEP-MAC-2011-06-25 (Macroeconomics)
- NEP-MON-2011-06-25 (Monetary Economics)
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