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Is fiscal policy more effective in uncertain times or during recessions?

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  • Alloza, Mario

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

  • Alloza, Mario, 2016. "Is fiscal policy more effective in uncertain times or during recessions?," LSE Research Online Documents on Economics 86179, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:86179
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    File URL: http://eprints.lse.ac.uk/86179/
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    References listed on IDEAS

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    1. repec:nbr:nberch:13342 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Ryan Niladri Banerjee & Fabrizio Zampolli, 2016. "What drives the short-run costs of fiscal consolidation? Evidence from OECD countries," BIS Working Papers 553, Bank for International Settlements.
    2. Felix Reichling & Charles Whalen, 2015. "The Fiscal Multiplier and Economic Policy Analysis in the United States: Working Paper 2015-02," Working Papers 49925, Congressional Budget Office.
    3. Berg, Tim Oliver, 2016. "Business Uncertainty and the Effectiveness of Fiscal Policy in Germany," MPRA Paper 69162, University Library of Munich, Germany.
    4. repec:ucp:jpolec:doi:10.1086/696277 is not listed on IDEAS
    5. Valerie A. Ramey & Sarah Zubairy, 2018. "Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data," Journal of Political Economy, University of Chicago Press, vol. 126(2), pages 850-901.

    More about this item

    Keywords

    fiscal policy; vector autoregressions; uncertainty.;

    JEL classification:

    • 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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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