Identifying Global and National Output and Fiscal Policy ShocksUsing a GVAR

Alexander Chudik, Mohammad Pesaran and Kamiar Mohaddes

No 1286, Working Papers from Economic Research Forum

Abstract: The paper contributes to the growing global VAR (GVAR) literature by showing how global and national shocks can be identified within a GVAR framework. The usefulness of the proposed approach is illustrated in an application to the analysis of the interactions between public debt and real output growth in a multi-country setting, and the results are compared to those obtained fromstandard single country VAR analysis. We find that on average (across countries) global shocks explain about one third of the long-horizon forecast error variance of output growth, and about one fifth of the long run variance of the rate of change of debt-to-GDP. Evidence on the degree of cross-sectional dependence in these variables and their innovations are exploited to identify the global shocks, and priors are used to identify the national shocks within a Bayesian framework. It is found that posterior median debt elasticity with respect to output is much larger when the risein output is due to a fiscal policy shock, as compared to when the rise in output isdue to a positive technology shock. The cross country average of the median debt elasticity is 1.58 when the rise in output is due to a fiscal expansion as compared to 0.75 when the rise in output follows from a favorable output shock.

Pages: 112 pages
Date: 2019, Revised 2019
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published by The Economic Research Forum (ERF)

Downloads: (external link)
http://erf.org.eg/wp-content/uploads/2019/01/12861.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://erf.org.eg/wp-content/uploads/2019/01/12861.pdf [301 Moved Permanently]--> https://erf.org.eg/wp-content/uploads/2019/01/12861.pdf)
https://bit.ly/2G4cZfg

Related works:
Chapter: Identifying Global and National Output and Fiscal Policy Shocks Using a GVAR (2020)
Working Paper: Identifying Global and National Output and Fiscal Policy Shocks Using a GVAR (2019)
Working Paper: Identifying global and national output and fiscal policy shocks using a GVAR (2019)
Working Paper: Identifying Global and National Output and Fiscal Policy Shocks Using a GVAR (2018)
Working Paper: Identifying Global and National Output and Fiscal Policy Shocks Using a GVAR (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:erg:wpaper:1286

Access Statistics for this paper

More papers in Working Papers from Economic Research Forum Contact information at EDIRC.
Bibliographic data for series maintained by Namees Nabeel ().