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Is Fiscal Policy More Effective in Uncertain Times or During Recessions?

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  • Mario Alloza

    (Bank of Spain
    Centre for Macroeconomics (CFM))

Abstract

This paper estimates the impact of government spending shocks on economic activity during periods of high and low uncertainty and during periods of boom and recession. We find that government spending shocks have larger impacts on output in booms than in recessions and larger impacts during tranquil times than during uncertain times. The results suggest that confidence plays an important role in explaining this differential impact.

Suggested Citation

  • Mario Alloza, 2014. "Is Fiscal Policy More Effective in Uncertain Times or During Recessions?," Discussion Papers 1631, Centre for Macroeconomics (CFM), revised Oct 2016.
  • Handle: RePEc:cfm:wpaper:1631
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    More about this item

    Keywords

    Fiscal policy; Vector Autoregressions; Uncertainty;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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