Fiscal foresight and the effects of government spending: It’s all in the monetary-fiscal mix

Guido Ascari, Peder Beck-Friis, Anna Florio and Alessandro Gobbi ()
Additional contact information
Peder Beck-Friis: PIMCO
Alessandro Gobbi: University of Milan

No 2112, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: Announcements of future government spending have different effects on activity depending on the monetary-fiscal policy mix: They are contractionary in the monetary regime but expansionary in the fiscal regime. This result contrasts with the expansionary nature of government spending at implementation in both regimes. Anticipation effects can therefore help empirically distinguish between the two regimes. Data support this theoretical result, reconciling conflicting results in the empirical literature that disappear once conditioning on the policy regime. These results suggest that it could be (un)wise to anticipate future fiscal policies, depending on the regime in place.

Keywords: Monetary policy and fiscal policy interactions; Government spending; Fiscal foresight; Non-fundamentalness (search for similar items in EconPapers)
JEL-codes: E52 E62 E63 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2021-03
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Journal Article: Fiscal foresight and the effects of government spending: It’s all in the monetary-fiscal mix (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:2112

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