Fiscal Impulse and the Real Economy

Ali F Darrat

Public Finance = Finances publiques, 1986, vol. 41, issue 3, 316-30

Abstract: This paper examines whether the German authorities can use fiscal (and monetary) policy to raise real output above the trend level. In specifying the anticipated policy and real output equations, Akaike's FPE criterion and Granger's causality tests are employed. These equations, moreover, stress the open-economy nature of Germany and avoid possible endogeneity problems. The results, generated using Zellner's system-estimation method, indicate that only the unanticipated component of fiscal policy can cause significant changes in real output, casting doubt on the usefulness of fiscal policy as a real stabilization tool.

Date: 1986
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Persistent link: https://EconPapers.repec.org/RePEc:pfi:pubfin:v:41:y:1986:i:3:p:316-30

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