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Fiscal Policy in an estimated open-economy model for the EURO area

Marco Ratto (), Roeger Werner and Veld Jan
Additional contact information
Roeger Werner: Eurepean Commission, DG ECFIN
Veld Jan: European Commission, DG ECFIN

Authors registered in the RePEc Author Service: Jan in 't Veld

No 43, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: This paper presents an open economy DSGE model, which is estimated on a euro area data set using Bayesian techniques. It extents current models by allowing for a detailed empirical analysis of fiscal stabilisation policies. Reaction functions for expenditure categories are estimated in order to measure the extent of the fiscal response of various expenditure categories and to determine the lags of fiscal policy. On the revenue side we use the OECD tax elasticities. Our paper has three objectives: On the methodological side we are interested how much the addition of fiscal policy improves the fit of the DSGE model. The economic issues we explore are first, what has been the contribution of fiscal policy to stabilize the euro area economy? And second, what has been the size of fiscal shocks and how much have they increased the volatility of GDP growth and inflation in the euro area

Keywords: DSGE Models; Fiscal Policy (search for similar items in EconPapers)
JEL-codes: C13 E12 E62 (search for similar items in EconPapers)
Date: 2006-07-04
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec, nep-mac and nep-pbe
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Working Paper: Fiscal policy in an estimated open-economy model for the Euro area (2007) Downloads
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