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Fiscal Policy Innovations In Advanced Economies

Kwabena Ackon

MPRA Paper from University Library of Munich, Germany

Abstract: Unprecedented is a word that best describes the current state of advanced economies. Interest rates are low in many advanced countries and negative in a few others suggesting that monetary policy has lost its effectiveness. The economic policy tool that has not been implemented yet by many advanced economies is fiscal policy. This thesis studies the effect of fiscal policy in USA, UK and Germany and find positive effects of extra government purchases on output, inflation, private consumption, business investment and wages. As a contribution to the academic literature on fiscal policy, this thesis estimates the impact of automatic stabilisers on economic activity and finds it holds predictive content for the path of output and inflation with both showing a positive response. Furthermore, this thesis adds to the literature on state-dependence fiscal policy by using a novel econometric approach to study the effect of expansionary fiscal policy during recessions.

Keywords: Fiscal Policy; Econometrics; Investment; Economic Growth; Interest Rates; Inflation (search for similar items in EconPapers)
JEL-codes: E0 E00 E02 E03 E1 E12 E17 E4 E43 E44 E6 E62 F0 H1 H11 H2 H23 H3 H31 H32 H5 H51 H52 H53 H54 H55 (search for similar items in EconPapers)
Date: 2020-02-01
New Economics Papers: this item is included in nep-mac and nep-pbe
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