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The Macroeconomic Effects of Exogenous Fiscal Policy Shocks in Germany: A Disaggregated SVAR Analysis

Listed author(s):
  • Tenhofen Jörn

    ()

    (University of Bonn, Institute of Econometrics and OR, Adenauerallee 24-42, 53113 Bonn, Germany)

  • Wolff Guntram B.

    ()

  • Heppke-Falk Kirsten H.

    (Deutsche Bundesbank, Wilhelm-Epstein-Str. 14, 60431 Frankfurt am Main, Germany)

We investigate the effects of fiscal policy shocks on the German economy extending the SVAR approach of Blanchard and Perotti (2002). Direct government expenditure shocks are found to increase output and private consumption on impact. The output multiplier is smaller than one and is falling rather quickly reaching zero after 3 years. Government operating expenditure has size able positive effects on output, in the long run in particular due to public capital formation. Compensation of public employees is not effective in stimulating the economy.Government net revenue shocks do not affect output significantly. Indirect taxes have little effects, while direct taxes lower output significantly. Overall, the effects of fiscal policy are short-lived with the exception of public investment increases.

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Article provided by De Gruyter in its journal Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik).

Volume (Year): 230 (2010)
Issue (Month): 3 (June)
Pages: 328-355

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Handle: RePEc:jns:jbstat:v:230:y:2010:i:3:p:328-355
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