What is the Importance of Monetary and Fiscal Shocks in Explaining US Macroeconomic Fluctuations?

Barbara Rossi and Sarah Zubairy

No 11-02, Working Papers from Duke University, Department of Economics

Abstract: This paper analyzes the importance of monetary and fiscal policy shocks in explaining US macroeconomic fluctuations, and establishes new stylized facts. The novelty of our empirical analysis is that we jointly consider both monetary and fiscal policy, whereas the existing literature only focuses on either one or the other. Our main findings are twofold: fiscal shocks are relatively more important in explaining medium cycle fluctuations whereas monetary policy shocks are relatively more important in explaining business cycle fluctuations; and failing to recognize that both monetary and fiscal policy simultaneously affect macroeconomic variables might incorrectly attribute the fluctuations to the wrong source.

Keywords: Monetary policy; government spending; fiscal policy; business cycle fluctuations; medium cycle (search for similar items in EconPapers)
JEL-codes: C5 E1 E5 E6 (search for similar items in EconPapers)
Pages: 33
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (99)

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http://ssrn.com/abstract=1747192 main text

Related works:
Journal Article: What Is the Importance of Monetary and Fiscal Shocks in Explaining U.S. Macroeconomic Fluctuations? (2011)
Journal Article: What Is the Importance of Monetary and Fiscal Shocks in Explaining U.S. Macroeconomic Fluctuations? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:duk:dukeec:11-02

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