Pre-announcement and Timing - The Effects of a Government Expenditure Shock
No ECO2009/40, Economics Working Papers from European University Institute
This paper investigates the effect of a government expenditure shock on consumption and real wages. I identify the shock by exploiting its pre-announced nature, i.e. different signs of the responses in investment, hours worked and output during the announcement and after the realization of the shock. Since pre-announcement leads to a non-stationary moving average representation, I estimate and identify a VMA model. The identifying restrictions are derived from a DSGE model, which is estimated by matching the impulse response functions of the VMA model. Private consumption is found to respond negatively during the announcement period and positively after the realization. The reaction of real wages is significantly positive on impact, decreases during the announcement horizon, and is again significantly positive for two quarters after the realization.
Keywords: Fiscal Policy shock; Bayesian Estimation; DSGE model; Vector Autoregression (search for similar items in EconPapers)
JEL-codes: C32 E62 H0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
http://cadmus.eui.eu/dspace/bitstream/1814/12773/1/ECO_2009_40.pdf main text
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://cadmus.eui.eu/dspace/bitstream/1814/12773/1/ECO_2009_40.pdf [301 Moved Permanently]--> https://cadmus.eui.eu/dspace/bitstream/1814/12773/1/ECO_2009_40.pdf)
Journal Article: Pre-announcement and timing: The effects of a government expenditure shock (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eui:euiwps:eco2009/40
Access Statistics for this paper
More papers in Economics Working Papers from European University Institute Badia Fiesolana, Via dei Roccettini, 9, 50014 San Domenico di Fiesole (FI) Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Cécile Brière ().