Identifying Global and National Output and Fiscal Policy Shocks Using a GVAR
Alexander Chudik,
M Pesaran () and
Kamiar Mohaddes ()
A chapter in Essays in Honor of Cheng Hsiao, 2020, vol. 41, pp 143-189 from Emerald Publishing Ltd
Abstract:
Abstract This chapter contributes to the growing global VAR (GVAR) literature by showing how global and national shocks can be identified within a GVAR framework. The usefulness of the proposed approach is illustrated in an application to the analysis of the interactions between public debt and real output growth in a multicountry setting, and the results are compared to those obtained from standard single country VAR analysis. We find that on average (across countries) global shocks explain about one-third of the long-horizon forecast error variance of output growth, and about one-fifth of the long-run variance of the rate of change of debt-to-GDP. Evidence on the degree of cross-sectional dependence in these variables and their innovations are exploited to identify the global shocks, and priors are used to identify the national shocks within a Bayesian framework. It is found that posterior median debt elasticity with respect to output is much larger when the rise in output is due to a fiscal policy shock, as compared to when the rise in output is due to a positive technology shock. The cross-country average of the median debt elasticity is 1.45 when the rise in output is due to a fiscal expansion as compared to 0.76 when the rise in output follows from a favorable output shock.
Keywords: Factor-augmented VARs; global VARs; identification of Global and country-specific shocks; Bayesian analysis; public debt and output growth; debt elasticity; C30; E62; H6 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
http://www.emeraldinsight.com/10.1108/S0731-905320 ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers
Related works:
Working Paper: Identifying Global and National Output and Fiscal Policy Shocks Using a GVAR (2019) 
Working Paper: Identifying global and national output and fiscal policy shocks using a GVAR (2019) 
Working Paper: Identifying Global and National Output and Fiscal Policy ShocksUsing a GVAR (2019) 
Working Paper: Identifying Global and National Output and Fiscal Policy Shocks Using a GVAR (2018) 
Working Paper: Identifying Global and National Output and Fiscal Policy Shocks Using a GVAR (2018) 
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:eme:aecozz:s0731-905320200000041005
Ordering information: This item can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://www.emeraldgr ... ies.htm?id=0731-9053
Access Statistics for this chapter
More chapters in Advances in Econometrics from Emerald Publishing Ltd
Bibliographic data for series maintained by Charlotte Maiorana ().