Fiscal foresight and the effects of government spending: It’s all in the monetary-fiscal mix

Guido Ascari, Peder Beck-Friis, Anna Florio and Alessandro Gobbi

Journal of Monetary Economics, 2023, vol. 134, issue C, 1-15

Abstract: Announcements of future government spending have different effects on economic activity depending on the monetary-fiscal policy mix. Upon announcement, they are contractionary in the monetary regime but expansionary in the fiscal regime, in contrast with the expansionary nature of government spending at implementation in both regimes. Anticipation effects can therefore help empirically distinguish between the two regimes. Data support our theoretical insight, reconciling conflicting results in the empirical literature that disappear once conditioning on the policy regime. This evidence suggests that it could be (un)wise to anticipate future fiscal policies, depending on the regime in place.

Keywords: Monetary policy and fiscal policy interactions; Government spending; Fiscal foresight; Non-fundamentalness (search for similar items in EconPapers)
JEL-codes: E52 E62 E63 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Fiscal foresight and the effects of government spending: It’s all in the monetary-fiscal mix (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:134:y:2023:i:c:p:1-15

DOI: 10.1016/j.jmoneco.2022.11.008

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