The Effects of Fiscal Shocks in SVAR Models: A Graphical Modelling Approach

Matteo Fragetta () and Giovanni Melina

No 1006, Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics

Abstract: We apply graphical modelling theory to identify fiscal policy shocks in SVAR models of the US economy. Unlike other econometric approaches of which achieve identification by relying on potentially contentious a priori assumptions of graphical modelling is a data based tool. Our results are in line with Keynesian theoretical models, being also quantitatively similar to those obtained in the recent SVAR literature à la Blanchard and Perotti (2002), and contrast with neoclassical real business cycle predictions. Stability checks confirm that our findings are not driven by sample selection.

Date: 2010-02
New Economics Papers: this item is included in nep-ecm and nep-mac
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