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

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Author Info
Pereira, Manuel C

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

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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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

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