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Fiscal policy and credit spreads: Evidence from a SVAR

Maria Olivero ()
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Maria Olivero: Drexel University

Economics Bulletin, 2019, vol. 39, issue 2, 1393-1403

Abstract: We study the interaction between fiscal policy, economic activity and credit market conditions using a structural VAR approach similar to that in Blanchard and Perotti (2002). We show that failing to account for the endogenous response of credit spreads to fiscal policy shocks results in the real effects of these shocks being underestimated. We see our results as indicating the presence of a not yet well understood "credit channel of fiscal policy transmission".

Keywords: fiscal policy; credit spreads (search for similar items in EconPapers)
JEL-codes: E6 E4 (search for similar items in EconPapers)
Date: 2019-05-31
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