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The Effects of Fiscal Policy Shocks: Evidence from a Bayesian SVAR Model With Uncertain Identifying Assumptions

Author

Listed:
  • Anna Sznajderska
  • Karol Szafranek
  • Alfred Haug

Abstract

We explore the effects of fiscal policy shocks on aggregate output and inflation. We use the novel Bayesian econometric methodology of Baumeister and Hamilton applied to the fiscal structural vector autoregressive model to evaluate key elasticities and fiscal multipliers using U.S. data from 1947Q1 to 2023Q4. In our baseline specification, the government spending multiplier is equal to approximately 1.1 and tax multiplier is approximately -1.4 after one year. The short-term output elasticity of government spending is slightly negative and the output elasticity of taxes is approximately equal to 2.6.

Suggested Citation

  • Anna Sznajderska & Karol Szafranek & Alfred Haug, 2024. "The Effects of Fiscal Policy Shocks: Evidence from a Bayesian SVAR Model With Uncertain Identifying Assumptions," KAE Working Papers 2024-102, Warsaw School of Economics, Collegium of Economic Analysis.
    • Handle: RePEc:sgh:kaewps:2024102
    DOI: 10.33119/kaewps2024102
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    File URL: https://hdl.handle.net/20.500.12182/1306
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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • 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
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • 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
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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