Pre-announcement and timing: The effects of a government expenditure shock
European Economic Review, 2012, vol. 56, issue 3, 373-388
An econometric strategy to identify a pre-announced fiscal policy shock is proposed. I show that the reduced form innovations can be recovered by estimating a Vector-moving-average model using the Kalman filter. The structural effects are identified exploiting the shock's pre-announced nature, which leads to potentially different signs of the responses of some endogenous variables during the announcement and after the realization of the shock. I illustrate my strategy by identifying a pre-announced shock to government consumption expenditures. I find that the response of private consumption is significantly negative on impact, rises and becomes significantly positive two quarters after the realization of the policy shock.
Keywords: Fiscal policy; Fiscal foresight; Vector Autoregressive Moving Average Process (search for similar items in EconPapers)
JEL-codes: C32 E62 (search for similar items in EconPapers)
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Working Paper: Pre-announcement and Timing - The Effects of a Government Expenditure Shock (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:56:y:2012:i:3:p:373-388
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