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Empirical Investigation of Fiscal Policy Shocks in the UK

  • Kamal, Mona

This article examines fiscal policy shocks in the UK through using a Bayesian Vector Autoregression (BVAR) model which applies Mountford and Uhlig (2009) type sign-restriction. It investigates the impact of three fiscal policy experiments on macroeconomic variable. Specifically, the Deficit-Financed Spending Increase (DFSI), the Deficit-Financed Tax Cut (DFTC), and the Balanced-Budget Spending Increase (BBSI). The results show that, the policy conclusion differs according to the period under investigation.

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File URL: https://mpra.ub.uni-muenchen.de/26473/1/MPRA_paper_26473.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26473.

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Date of creation: 01 Apr 2010
Handle: RePEc:pra:mprapa:26473
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  1. Ricardo M. Sousa & António Afonso, 2008. "The Macroeconomic Effects of Fiscal Policy," NIPE Working Papers 22/2008, NIPE - Universidade do Minho.
  2. Christina D. Romer & David H. Romer, 2007. "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," NBER Working Papers 13264, National Bureau of Economic Research, Inc.
  3. Andrew Mountford & Harald Uhlig, 2009. "What are the effects of fiscal policy shocks?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 960-992.
  4. Perotti, Roberto, 2005. "Estimating the Effects of Fiscal Policy in OECD Countries," CEPR Discussion Papers 4842, C.E.P.R. Discussion Papers.
  5. Martin Eichenbaum & Jonas D. M. Fisher, 2004. "Fiscal policy in the aftermath of 9/11," Working Paper Series WP-04-06, Federal Reserve Bank of Chicago.
  6. Peersman, Gert, 2003. "What Caused the Early Millennium Slowdown? Evidence Based on Vector Autoregressions," CEPR Discussion Papers 4087, C.E.P.R. Discussion Papers.
  7. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
  8. Fabio C. Bagliano & Carlo A. Favero, "undated". "Measuring Monetary Policy with VAR Models: an Evaluation," Working Papers 132, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  9. Rotemberg, Julio J & Woodford, Michael, 1992. "Oligopolistic Pricing and the Effects of Aggregate Demand on Economic Activity," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1153-1207, December.
  10. Craig Burnside & Martin Eichenbaum & Jonas Fisher, 2003. "Fiscal Shocks and Their Consequences," NBER Working Papers 9772, National Bureau of Economic Research, Inc.
  11. Canova, Fabio & Nicolo, Gianni De, 2002. "Monetary disturbances matter for business fluctuations in the G-7," Journal of Monetary Economics, Elsevier, vol. 49(6), pages 1131-1159, September.
  12. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1329-1368.
  13. Morten O. Ravn & Stephanie Schmitt-Grohé & Martín Uribe, 2007. "Explaining the Effects of Government Spending Shocks on Consumption and the Real Exchange Rate," NBER Working Papers 13328, National Bureau of Economic Research, Inc.
  14. Wendy Edelberg & Martin Eichenbaum & Jonas D.M. Fisher, 1998. "Understanding the Effects of a Shock to Government Purchases," NBER Working Papers 6737, National Bureau of Economic Research, Inc.
  15. Roberto Perotti, 2004. "Estimating the effects of fiscal policy in OECD countries," Working Papers 276, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  16. King, R.G. & Baxter, M., 1990. "Fiscal Policy In General Equilibrium," RCER Working Papers 244, University of Rochester - Center for Economic Research (RCER).
  17. Barro, Robert J., 1987. "Government spending, interest rates, prices, and budget deficits in the United Kingdom, 1701-1918," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 221-247, September.
  18. Sims, Christopher A & Zha, Tao, 1998. "Bayesian Methods for Dynamic Multivariate Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 949-68, November.
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