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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Web page: http://econ.duke.edu/
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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- Eric Sims & Ruediger Bachmann, 2011.
"Confidence and the Transmission of Government Spending Shocks,"
2011 Meeting Papers
83, Society for Economic Dynamics.
- Bachmann, Rüdiger & Sims, Eric R., 2012. "Confidence and the transmission of government spending shocks," Journal of Monetary Economics, Elsevier, vol. 59(3), pages 235-249.
- Rüdiger Bachmann & Eric R. Sims, 2011. "Confidence and the Transmission of Government Spending Shocks," NBER Working Papers 17063, National Bureau of Economic Research, Inc.
- Tommaso Monacelli & Roberto Perotti & Antonella Trigari, 2010.
"Unemployment Fiscal Multipliers,"
NBER Working Papers
15931, National Bureau of Economic Research, Inc.
- Eddie Gerba & Klemens Hauzenberger, 2013. "Estimating US Fiscal and Monetary Interactions in a Time Varying VAR," Studies in Economics 1303, Department of Economics, University of Kent.
- Valerie A. Ramey, 2009.
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NBER Working Papers
15464, National Bureau of Economic Research, Inc.
- Valerie A. Ramey, 2011. "Identifying Government Spending Shocks: It's all in the Timing," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 1-50.
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"Macro Fiscal Policy in Economic Unions: States as Agents,"
NBER Working Papers
19559, National Bureau of Economic Research, Inc.
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- Guglielmo Maria Caporale & Mauro Costantini & Antonio Paradiso, 2012.
"Re-examining the Decline in the US Saving Rate: The Impact of Mortgage Equity Withdrawal,"
Discussion Papers of DIW Berlin
1232, DIW Berlin, German Institute for Economic Research.
- Caporale, Guglielmo Maria & Costantini, Mauro & Paradiso, Antonio, 2013. "Re-examining the decline in the US saving rate: The impact of mortgage equity withdrawal," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 215-225.
- Guglielmo Maria Caporale & Mauro Costantini & Antonio Paradiso, 2012. "Re-examining the Decline in the US Saving Rate: The Impact of Mortgage Equity Withdrawal," CESifo Working Paper Series 3897, CESifo Group Munich.
- Alfred A. Haug & Tomasz Jedrzejowicz & Anna Sznajderska, 2013.
"Combining Monetary and Fiscal Policy in an SVAR for a Small Open Economy,"
1313, University of Otago, Department of Economics, revised Oct 2013.
- Alfred A.Haug & Tomasz Jędrzejowicz & Anna Sznajderska, 2013. "Combining monetary and fiscal policy in an SVAR for a small open economy," National Bank of Poland Working Papers 168, National Bank of Poland, Economic Institute.
- Emily Anderson & Atsushi Inoue & Barbara Rossi, 2012. "Heterogeneous Consumers and Fiscal Policy Shocks," 2012 Meeting Papers 261, Society for Economic Dynamics.
- Daniel P. Murphy, 2013. "How does government spending stimulate consumption?," Globalization and Monetary Policy Institute Working Paper 157, Federal Reserve Bank of Dallas.
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