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The effects of fiscal expansions: an international comparison

Evi Pappa ()

No 409, Working Papers from Barcelona Graduate School of Economics

Abstract: We compare the transmission of fiscal shocks in four OECD countries and in the Euro area. Fiscal shocks are identified in a SVAR by the restrictions that disturbances to government consumption, government investment and government employment increase output and deficits contemporaneously. These restrictions hold in both prototype RBC and New-Keynesian models. All spending shocks increase private consumption and employment, while the responses of private investment and the real wage are mixed. The output effects of government consumption and investment shocks are smaller than those of government employment shocks for all countries and all samples. The transmission of fiscal shocks has changed features over time.

Keywords: fiscal policy shocks; SVARs; sign restrictions; stability (search for similar items in EconPapers)
JEL-codes: C11 E12 E32 E62 H30 (search for similar items in EconPapers)
Date: 2009-02
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