The Macroeconomic Effects of Fiscal Policy

António Afonso (1, 2)

1 Economics
2 Economics

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.

Mots clés: Social Sciences & Humanities

Domaines: Économie et finance quantitative [q-fin]

António Afonso. The Macroeconomic Effects of Fiscal Policy. Applied Economics, 2011, pp.1. ⟨10.1080/00036846.2011.591732⟩. ⟨hal-00719484⟩