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On the size of fiscal multipliers: A counterfactual analysis

  • Kuckuck, Jan
  • Westermann, Frank

We point out that fiscal multipliers derived from SVAR-models include the predicted future path of policy instruments. After the initial shock, net taxes and government expenditures react to each other and are autocorrelated. In a counterfactual simulation, we report fiscal multipliers that abstract from these dynamic responses.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 123 (2014)
Issue (Month): 1 ()
Pages: 26-32

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Handle: RePEc:eee:ecolet:v:123:y:2014:i:1:p:26-32
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Perotti, Roberto, 2005. "Estimating the Effects of Fiscal Policy in OECD Countries," CEPR Discussion Papers 4842, C.E.P.R. Discussion Papers.
  2. Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. Végh Gramont, 2011. "How Big (Small?) Are Fiscal Multipliers?," IMF Working Papers 11/52, International Monetary Fund.
  3. Troy Davig & Eric Leeper, 2009. "Monetary-Fiscal Policy Interactions And Fiscal Stimulus," Caepr Working Papers 2009-010, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  4. Cogan, John F. & Cwik, Tobias & Taylor, John B. & Wieland, Volker, 2010. "New Keynesian versus old Keynesian government spending multipliers," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 281-295, March.
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  11. Olivier J. Blanchard & Daniel Leigh, 2013. "Growth Forecast Errors and Fiscal Multipliers," IMF Working Papers 13/1, International Monetary Fund.
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  13. Jonathan A. Parker, 2011. "On Measuring the Effects of Fiscal Policy in Recessions," NBER Working Papers 17240, National Bureau of Economic Research, Inc.
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  17. Valerie A. Ramey, 2011. "Can Government Purchases Stimulate the Economy?," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 673-85, September.
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