Economics at your fingertips  

Do expectations matter? Reassessing the effects of government spending on key macroeconomic variables in Germany

Klaus Gründler and Sarah Sauerhammer

Applied Economics Letters, 2018, vol. 25, issue 15, 1045-1050

Abstract: This article contributes to the debate on how to properly identify exogenous fiscal shocks in the data. We include expectations held by consumers and firms into the standard vector autoregression (VAR) framework based on information from historical issues of the German political magazine Der Spiegel. The findings underscore the need to account for expectations, as failing to do so leads to significant misinterpretation of the effects of government spending. When neglecting anticipation effects, our results support the recent findings for Germany by pointing to a rather positive effect of government spending on GDP. However, inclusion of expectations yields a change in this effect, suggesting that government spending is much less beneficial for GDP, as it crowds out private consumption and investment.

Date: 2018
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Do expectations matter? Reassessing the effect of government spending on key macroeconomic variables in Germany (2016) Downloads
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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

Page updated 2019-03-31
Handle: RePEc:taf:apeclt:v:25:y:2018:i:15:p:1045-1050