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Empirical evidence on the stabilizing role of fiscal and monetary policies in the US

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  • Pereira, Manuel C

Abstract

I apply SVAR tools and counterfactual simulation techniques to study the (de)stabilizing role of monetary and fiscal policies in the US, using quarterly data from 1955 to 2005. Monetary and fiscal disturbances contributed much less to output volatility in the second part of the sample. This result stems from their smaller impact and, to a lesser extent, from a decline in the respective variance. Systematic taxes net of transfers were the most important stabilizing force in the course of postwar recessions until the eighties. Monetary policy had a comparatively smaller role in offsetting the downturns in activity at those episodes. Net taxes have, however, suffered a marked lost of effectiveness in recent decades.

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File URL: http://mpra.ub.uni-muenchen.de/19675/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17474.

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Date of creation: Sep 2008
Date of revision: Sep 2009
Handle: RePEc:pra:mprapa:17474

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Keywords: fiscal policy; monetary policy; stabilization; structural vector autoregression;

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References

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Cited by:
  1. Eddie Gerba & Klemens Hauzenberger, 2013. "Estimating US Fiscal and Monetary Interactions in a Time Varying VAR," Studies in Economics, Department of Economics, University of Kent 1303, Department of Economics, University of Kent.
  2. Manuel Coutinho Pereira, 2012. "Revisiting the effectiveness of monetary and fiscal policy in the US, measured on the basis of structural VARs," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department, Banco de Portugal, Economics and Research Department.

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