The Macroeconomic Effects of Fiscal Policy

António Afonso ()
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António Afonso: Economics - European Central Bank, Economics - ISEG/UTL-Tehnical University of Lisbon

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Abstract: We investigate the macroeconomic effects of fiscal policy using a Bayesian Structural Vector Autoregression approach. We identify fiscal policy shocks via a partial identification scheme, but also: (i) include the feedback from government debt (ii); look at the impact on the composition of output; (iii) assess the effects on asset markets (iv) use quarterly data; and (v) analyze empirical evidence from the U.S., the U.K., Germany, and Italy. The results show that government spending shocks, in general, have a small effect on GDP; lead to important "crowding-out" effects; have a varied impact on housing prices and generate a quick fall in stock prices. Government revenue shocks generate a mixed effect on housing prices and a small and positive effect on stock prices. The empirical evidence also suggests that it is important to explicitly consider the government debt dynamics in the model.

Keywords: Social; Sciences; &; Humanities (search for similar items in EconPapers)
Date: 2011-07-20
Note: View the original document on HAL open archive server: https://hal.science/hal-00719484
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Citations: View citations in EconPapers (26)

Published in Applied Economics, 2011, pp.1. ⟨10.1080/00036846.2011.591732⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00719484

DOI: 10.1080/00036846.2011.591732

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