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Time-varying fiscal policy in the U.S

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  • Manuel Coutinho Pereira
  • Artur Silva Lopes

Abstract

To investigate time heterogeneity in the e¤ects of fiscal policy in the U.S., we use a non-recursive, Blanchard and Perotti-like structural VAR with time-varying parameters, estimated through Bayesian simulation over the 1965:2-2009:2 period. Our evidence suggests that fiscal policy has lost some capacity to stimulate output but that this trend is more pronounced for taxes net of transfers than for government expenditure, whose e¤ectiveness declines only slightly. Fiscal multipliers keep conventional signs throughout. An investigation of changes in ?scal policy conduct indicates an increase in the countercyclical activism of net taxes over time, which appears to have reached a maximum during the 2008-09 recession.

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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w201021.

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Date of creation: 2010
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Handle: RePEc:ptu:wpaper:w201021

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Cited by:
  1. 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.
  2. Michal Franta & Jan Libich & Petr Stehlík, 2012. "Tracking Monetary-Fiscal Interactions across Time and Space," CAMA Working Papers 2012-40, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. Pragidis, Ioannis & Gogas, Periklis & Plakandaras, Vasilios & Papadimitriou, Theophilos, 2013. "Fiscal shocks and asymmetric effects: a comparative analysis," DUTH Research Papers in Economics 8-2013, Democritus University of Thrace, Department of Economics.
  4. Gogas, Periklis & Pragidis, Ioannis, 2013. "Asymmetric Fiscal Policy Shocks," DUTH Research Papers in Economics 4-2013, Democritus University of Thrace, Department of Economics.
  5. 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.
  6. Ricardo Silva & Vitor Manuel Carvalho & Ana Paula Ribeiro, 2013. "How large are fiscal multipliers? A panel-data VAR approach for the Euro area," FEP Working Papers 500, Universidade do Porto, Faculdade de Economia do Porto.
  7. Michal Franta & Roman Horvath & Marek Rusnak, 2011. "Evaluating Changes in the Monetary Transmission Mechanism in the Czech Republic," Working Papers, Czech National Bank, Research Department 2011/13, Czech National Bank, Research Department.
  8. Virkola, Tuomo, 2014. "Exchange Rate Regime, Fiscal Foresight and the Effectiveness of Fiscal Policy in a Small Open Economy," ETLA Reports 20, The Research Institute of the Finnish Economy.
  9. Schalck, Christophe, 2012. "Investigating heterogeneity in European fiscal behaviours," Research in Economics, Elsevier, Elsevier, vol. 66(4), pages 383-390.
  10. Berg, Tim Oliver, 2014. "Time Varying Fiscal Multipliers in Germany," MPRA Paper 57223, University Library of Munich, Germany.
  11. Valerie A. Ramey, 2011. "Can Government Purchases Stimulate the Economy?," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 673-85, September.
  12. Arratibel, Olga & Michaelis, Henrike, 2013. "The Impact of Monetary Policy and Exchange Rate Shocks in Poland: Evidence from a Time-Varying VAR," Discussion Papers in Economics 21088, University of Munich, Department of Economics.
  13. Arratibel, Olga & Michaelis, Henrike, 2014. "The impact of monetary policy and exchange rate shocks in Poland: evidence from a time-varying VAR," Working Paper Series, European Central Bank 1636, European Central Bank.

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