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Fiscal Policy Shocks in the Euro Area and the US: An Empirical Assessment

  • Pablo Burriel
  • Francisco de Castro
  • Daniel Garrote
  • Esther Gordo
  • Joan Paredes
  • Javier J. Pérez

We analyse the impact of fiscal policy shocks in the euro area as a whole, using a newly available quarterly dataset of fiscal variables for the period 1981-2007. To allow for comparability with previous results on euro area countries and the US, we use a standard structural VAR framework, and study the impact of aggregated and disaggregated government spending and net taxes shocks. In addition, to frame euro area results, we apply the same methodology for the same sample period to US data. We also explore the sensitivity of the provided results to the inclusion of variables aiming at measuring “financial stress” (increases in risk) and “fiscal stress” (sustainability concerns). Analysing US and euro area data with a common methodology provides some interesting insights on the interpretation of fiscal policy shocks. JEL Classification: E62, H30

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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 31 (2010)
Issue (Month): 2 (06)
Pages: 251-285

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Handle: RePEc:ifs:fistud:v:31:y:2010:i:2:p:251-285
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