 The estimated general equilibrium effects of fiscal policy: the case of the euro areaLorenzo Forni and Libero Monteforte No 142, Computing in Economics and Finance 2006 from Society for Computational Economics Abstract: We reconsider the macroeconomic effects of fiscal policy in the context of a new-keynesian dynamic stochastic general equilibrium model. We assume that a fraction of the agents are non Ricardian and estimate the model parameters using Bayesian techniques. Our results show that the estimates of important parameters of the model differ depending on how detailed the fiscal policy is modelled. In particular, when we properly model distortionary taxes and take into account the fact that government expenditure is a composite aggregate (including consumption of goods and compensations for government employees), the estimated share of non Ricardian agents is significant and the model is able to replicate the widespread evidence that private consumption responds positively to government expenditure shocks. Previous papers, which mainly considered lump-sum taxes and treated government consumption as one single aggregate, obtained a smaller estimated share of non Ricardian households and no significant effect of government spending shocks on macroeconomic variables Keywords: fiscal policy; rule-of-thumb consumers; distortionary taxation; bayesian estimation (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sce:scecfa:142 Access Statistics for this paper More papers in Computing in Economics and Finance 2006 from Society for Computational Economics Contact information at EDIRC. |
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