Government Spending Shocks in Open Economy VARs
Mario Forni () and
Luca Gambetti ()
Center for Economic Research (RECent) from University of Modena and Reggio E., Dept. of Economics "Marco Biagi"
We identify government spending news and surprise shocks using a novel identification based on the Survey of Professional Forecasters. News shocks lead, through an increase of the interest rate, to a real appreciation of US dollar and a worsening of the trade balance. The opposite is found for the standard surprise shock which raises government spending on impact: the currency depreciates and net exports improve. We reconcile the two conflicting results showing the di erent timing of the spending reversals associated with the two shocks. The e ects of the news shock on government spending are much more persistent and the reversal occurs much later.
Keywords: Business Cycle Fluctuations; Euro area; Common Shocks; Near-Structural VARs. (search for similar items in EconPapers)
JEL-codes: C32 E32 E62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac, nep-opm and nep-pbe
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Journal Article: Government spending shocks in open economy VARs (2016)
Working Paper: Government Spending Shocks in Open Economy VARs (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:mod:recent:105
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