EconPapers    
Economics at your fingertips  
 

Characterization of the Dynamic Effects of Fiscal Shocks in a Small Open Economy

Nooman Rebei ()

Staff Working Papers from Bank of Canada

Abstract: The author studies the macroeconomic consequences of discretionary changes in the fiscal policy instruments for Canada. He adopts a semi-structural vector autoregression framework. Restrictions are based on institutional interactions between some policy and non-policy instruments that mimic a government's decision process. The author characterizes the actual economy's response to fiscal shocks, and proposes a theoretical model for a small open economy with nominal and real rigidities to test for the endogenous transmission mechanisms following shocks to government spending. He pursues a limited-information econometric strategy by comparing the theoretical impluse-response functions with the empirical ones, capturing the effects of a disturbance in government spending. Generally, the results of the model are very close to the observed reactions, especially for consumption, investment, exports, imports, and inflation; however, the model fails to predict the real exchange rate reaction.

Keywords: Economic models; Exchange rates; Fiscal policy (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2004
New Economics Papers: this item is included in nep-fin, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.bankofcanada.ca/wp-content/uploads/2010/02/wp04-41.pdf

Related works:
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:bca:bocawp:04-41

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2022-01-07
Handle: RePEc:bca:bocawp:04-41