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Quantitative Effects of Fiscal Foresight

In: Fiscal Policy (Trans-Atlantic Public Economics Seminar, TAPES)

Author

Listed:
  • Eric M. Leeper
  • Alexander W. Richter
  • Todd B. Walker

Abstract

Legislative and implementation lags imply that substantial time evolves between when news arrives about fiscal changes and when the changes actually take place—time when households and firms can adjust their behavior. We identify two types of fiscal news—government spending using the Survey of Professional Forecasters and taxes using the municipal bond market. The main contribution of the paper is a mapping from reduced-form estimates of news into a DSGE framework. We find that news about fiscal policy is a time-varying process and show that ignoring the time variation can have important consequences in a conventional macroeconomic model. (JEL E12, E62, H20, H30, H62)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Eric M. Leeper & Alexander W. Richter & Todd B. Walker, 2010. "Quantitative Effects of Fiscal Foresight," NBER Chapters, in: Fiscal Policy (Trans-Atlantic Public Economics Seminar, TAPES), pages 115-144, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:13347
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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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