Deficit Financed Public Expenditure in Argentina: A Structural Vector Autoregression Analysis
The goal of the paper is to analyze the importance of government debt in the propagation of fiscal shocks in the Argentine economy. For that reason we augment a standard fiscal policy vector Autoregression with the nominal debt to GDP ratio taken from a recently compiled IMF database. The main finding is that government debt has a crucial role for the implications of the model, and that the omission of the feedback of the debt (as a ratio of GDP) to the other variables in the system leads to very different conclusions for the effect of deficit finance government spending on the economy. Finally, we argue that not adding a measure of debt into the model is equivalent to assuming that debt as percentage of GDP is not changing following a deficit financed fiscal shock, which is in direct contraction to the implications of the optimal fiscal policy models.
|Date of creation:||01 Jun 2012|
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13425, National Bureau of Economic Research, Inc.
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728.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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NBER Working Papers
15464, National Bureau of Economic Research, Inc.
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- repec:oup:qjecon:v:117:y:2002:i:4:p:1329-1368 is not listed on IDEAS
- Evi Pappa, 2009. "The Effects Of Fiscal Shocks On Employment And The Real Wage," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 217-244, 02.
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