Non-Ricardian Aspects of Fiscal Policy in Chile

Luis Cespedes, Jorge Fornero and Jordi Galí

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: This paper examines non-Ricardian effects of government spending shocks in the Chilean economy. We first provide evidence on those effects based on vector autoregressions. We then show that such evidence can be accounted for by a model that features: (i) a sizeable share of non-Ricardian households (i.e. households which do not make use of financial markets and just consume their current labor income); (ii) nominal price and wage rigidities; (iii) an inflation targeting scheme, and (iv) a structural balance fiscal rule that represents the particular Chilean fiscal rule. The model is estimated employing Bayesian techniques. Finally, we use model simulations to demonstrate the countercyclical effects of the Chilean fiscal rule as compared with a zero-deficit rule.

Date: 2012-02
New Economics Papers: this item is included in nep-cba, nep-mac and nep-pub
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Citations: View citations in EconPapers (13)

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Related works:
Chapter: Non-Ricardian Aspects of Fiscal Policy in Chile (2013)
Journal Article: Non-Ricardian Aspects of Fiscal Policy in Chile (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:663

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