Pre-announcement and timing: The effects of a government expenditure shock

Alexander Kriwoluzky

European Economic Review, 2012, vol. 56, issue 3, 373-388

Abstract: 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)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292111001073
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Pre-announcement and Timing - The Effects of a Government Expenditure Shock (2009)
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:eee:eecrev:v:56:y:2012:i:3:p:373-388

DOI: 10.1016/j.euroecorev.2011.10.005

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().