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Discretionary Policy Interactions and the Fiscal Theory of the Price Level: A SVAR Analysis on French Data

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Author Info
Jerome Creel () (Observatoire Français des Conjonctures Économiques)
Paola Monperrus-Veroni () (Observatoire Français des Conjonctures Économiques)
Francesco Saraceno () (Observatoire Français des Conjonctures Économiques)

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Abstract

We estimate a SVAR model of the French economy. The econometric method originates in Blanchard and Perotti [Quarterly Journal of Economics, 2002] but owes also extensively to the fiscal theory of the price level (FTPL) that investigates the interactions between government surplus, debt accumulation and price dynamics. We have the objective, on the one hand, of assessing the effects of fiscal and monetary policy shocks on the economy; and, on the other, of studying the strategic interactions between fiscal and monetary authorities. As a consequence, the theoretical restrictions to identify our model are derived from a FTPL framework. Our estimations reveal so-called Keynesian features of fiscal and monetary shocks; meanwhile, they are consistent with the prediction of the FTPL as regards price dynamics. Although the first part of our findings agrees with most of the recent literature on the subject, the non-rejection of the FTPL is an originality.

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Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2005-12.

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Date of creation: 2005
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Handle: RePEc:fce:doctra:0512

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Related research
Keywords: Fiscal policy; Monetary policy; Fiscal theory of the price level; Structural VAR; France;

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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