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What Accounts for the Change in U.S Fiscal Policy Transmission ?

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  • Florin Bilbiie

    () (HEC Paris - Recherche - Hors Laboratoire - HEC Paris - Ecole des Hautes Etudes Commerciales)

  • G. Mueller
  • A. Meier

Abstract

Using vector autoregressions on U.S. time series for 1957-79 and 1983-2004, we find government spending shocks to have stronger effects on output, consumption, and wages in the earlier period. We try to account for this observation within a DSGE model featuring price rigidities and limited asset market participation. Specifically, we estimate the structural parameters of the model for both periods by matching impulse responses. Model-based counterfactual experiments suggest that most of the changes in fiscal policy transmission are accounted for by increased asset market participation and the more active monetary policy of the Volcker-Greenspan period.
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Suggested Citation

  • Florin Bilbiie & G. Mueller & A. Meier, 2006. "What Accounts for the Change in U.S Fiscal Policy Transmission ?," Working Papers hal-00515666, HAL.
    • Handle: RePEc:hal:wpaper:hal-00515666
    Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00515666
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    More about this item

    Keywords

    Change; U.S Fiscal Policy; Transmission;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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