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The macroeconomic effects of exogenous fiscal policy shocks in Germany: a disaggregated SVAR analysis

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Author Info
Wolff, Guntram B.
Tenhofen, Jörn
Heppke-Falk, Kirsten H.

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Abstract

We investigate the short-term effects of fiscal policy shocks on the German economy following the SVAR approach by Blanchard and Perotti (2002). We find that direct government expenditure shocks increase output and private consumption on impact with low statistical significance, while they decrease private investment, though insignificantly. For the sub-category government investment ? in contrast to government consumption ? a positive output effect is found, which is statistically significant until 12 quarters ahead. Allowing for anticipation effects of fiscal policy does not change the sign of the positive consumption response. Anticipated expenditure shocks have significant effects on output when the shock is realized, but not in the period of anticipation. In sum, effects of expenditure shocks are only short-lived. Government net revenue shocks do not affect output with statistical significance. However, when splitting up this aggregate, direct taxes lower output significantly, while small indirect tax revenue shocks have little effects. Compensation of public employees is equally not effective in stimulating the economy. --

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2006,41.

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Date of creation: 2006
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Handle: RePEc:zbw:bubdp1:5169

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Related research
Keywords: Fiscal policy; government spending; net revenue; policy anticipation; structural vector autoregression;

Find related papers by JEL classification:
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Tenhofen, Jörn & Wolff, Guntram B., 2007. "Does anticipation of government spending matter? Evidence from an expectation augmented VAR," Discussion Paper Series 1: Economic Studies 2007,14, Deutsche Bundesbank, Research Centre. [Downloadable!]
  2. Roberto Perotti, 2007. "In Search of the Transmission Mechanism of Fiscal Policy," NBER Working Papers 13143, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Ignacio Lozano Espitia & Karen Rodríguez, 2009. "Assessing the Macroeconomic Effects of Fiscal," BORRADORES DE ECONOMIA 005386, BANCO DE LA REPÚBLICA. [Downloadable!]
  4. Leif Lybecker Eskesen, 2009. "The Role for Counter-Cyclical Fiscal Policy in Singapore," IMF Working Papers 09/8, International Monetary Fund. [Downloadable!]
  5. António Afonso & Luca Agnello & Davide Furceri & Ricardo M. Sousa, 2009. "Assessing Long-Term Fiscal Developments: a New Approach," Working Papers 2009/19, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
    Other versions:
  6. Ricardo M. Sousa & António Afonso, 2008. "The Macroeconomic Effects of Fiscal Policy," NIPE Working Papers 22/2008, NIPE - Universidade do Minho. [Downloadable!]
    Other versions:
  7. Ricardo M. Sousa & António Afonso, 2009. "The Macroeconomic Effects of Fiscal Policy in Portugal: a Bayesian SVAR Analysis," NIPE Working Papers 3/2009, NIPE - Universidade do Minho. [Downloadable!]
    Other versions:
  8. Ignacio Lozano & Karen Rodríguez, . "Assessing the Macroeconomic Effects of Fiscal Policy in Colombia," Borradores de Economia 552, Banco de la Republica de Colombia. [Downloadable!]
  9. Davide Furceri & Ricardo M. Sousa, 2009. "The Impact of Government Spending on the Private Sector: Crowding-out versus Crowding-in Effects"," NIPE Working Papers 6/2009, NIPE - Universidade do Minho. [Downloadable!]
  10. Kühn, Stefan & Muysken, Joan & Veen, Tom van, 2009. "The Adverse Effects of Government Spending on Private Consumption in New Keynesian Models," Research Memoranda 004, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  11. Kalckreuth, Ulf von & Wolff, Guntram B., 2007. "Testing for contemporary fiscal policy discretion with real time data," Discussion Paper Series 1: Economic Studies 2007,24, Deutsche Bundesbank, Research Centre. [Downloadable!]
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