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Asymmetric Fiscal Policy Shocks

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  • Gogas, Periklis

    ()
    (Democritus University of Thrace)

  • Pragidis, Ioannis

    ()
    (Democritus University of Thrace)

Abstract

We empirically test the effects of unanticipated fiscal policy shocks on the growth rate and the cyclical component of real private output and reveal different types of asymmetries in fiscal policy implementation. The data used are quarterly U.S. observations over the period 1967:1 to 2011:4. In doing so, we use two alternative vector autoregressive systems in order to construct the fiscal policy shocks: one with the simple sum monetary aggregate MZM and one with the alternative CFS Divisia MZM aggregate. From each one of these systems we extracted four types of shocks: a negative and a positive government spending shock and a negative and a positive government revenue shock. These eight different types of unanticipated fiscal shocks were used next to empirically examine their effects on the growth rate and cyclical component of real private GNP in two sets of regressions: one that assumes only contemporaneous effects of the shocks on output and one that is augmented with four lags of each fiscal shock.

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Bibliographic Info

Paper provided by Democritus University of Thrace, Department of Economics in its series DUTH Research Papers in Economics with number 4-2013.

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Length: 17 pages
Date of creation: 04 May 2013
Date of revision:
Handle: RePEc:ris:duthrp:2013_004

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Postal: Department of Economics, University Campus, Komotini, 69100, Greece
Phone: (25310) 39.503
Fax: (25310) 39.502
Web page: http://www.econ.duth.gr/
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Keywords: Fiscal Policy; Asymmetric Effects; VAR;

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