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Quantitative Effects of Fiscal Foresight

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

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: Trans-Atlantic Public Economics Seminar (TAPES), Fiscal Policy, pages 115-144 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:13347
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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