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The Macroeconomic Effects Of Fiscal Policy. A Bvar Approach

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  • Ioana BOICIUC

    () (Academy of Economic Studies, Bucharest, Romaniaa)

Abstract

The interest on fiscal policy has been recently renewed due to the economic recession and given the limited scope of monetary policy to provide additional stimulus for the economy. Also the empirical studies on fiscal policy have not reached a consensus about the effects of fiscal shocks on macroeconomic variables. This study seeks to analyze the effects of government expenditure and tax revenue shocks on economic activity by applying a BVAR methodology. The advantage of the Bayesian technique is that it allows prior information to be imposed on the system, in addition to that provided by data. This paper provides a detailed evaluation of the effects of fiscal policy in Romania, but also for the Eastern European Emerging Markets. Quarterly data for five variables are used in the estimation: GDP, inflation, interest rate, government expenditure and tax revenues. The main results show that the fiscal policy has a small effect on the considered variable.

Suggested Citation

  • Ioana BOICIUC, 2014. "The Macroeconomic Effects Of Fiscal Policy. A Bvar Approach," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 14, pages 163-169, December.
  • Handle: RePEc:aic:revebs:y:2014:d:14:boiciuci
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    References listed on IDEAS

    as
    1. Andrew Mountford & Harald Uhlig, 2009. "What are the effects of fiscal policy shocks?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 960-992.
    2. António Afonso & Ricardo M. Sousa, 2012. "The macroeconomic effects of fiscal policy," Applied Economics, Taylor & Francis Journals, vol. 44(34), pages 4439-4454, December.
    3. António Afonso & Ricardo Sousa, 2011. "The macroeconomic effects of fiscal policy in Portugal: a Bayesian SVAR analysis," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(1), pages 61-82, April.
    4. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1329-1368.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Fiscal Policy; Bayesian estimation; VAR model;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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