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Title:The macroeconomic effects of exogenous fiscal policy shocks in Germany: a disaggregated SVAR analysis PDF Logo
Authors:Wolff, Guntram B.
Tenhofen, Jörn
Heppke-Falk, Kirsten H.
Issue Date:2006
Series/Report no.:Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2006,41
Abstract:We investigate the short-term effects of fiscal policy shocks on the German economy following the SVAR approach by Blanchard and Perotti (2002). We find that direct government expenditure shocks increase output and private consumption on impact with low statistical significance, while they decrease private investment, though insignificantly. For the sub-category government investment – in contrast to government consumption – a positive output effect is found, which is statistically significant until 12 quarters ahead. Allowing for anticipation effects of fiscal policy does not change the sign of the positive consumption response. Anticipated expenditure shocks have significant effects on output when the shock is realized, but not in the period of anticipation. In sum, effects of expenditure shocks are only short-lived. Government net revenue shocks do not affect output with statistical significance. However, when splitting up this aggregate, direct taxes lower output significantly, while small indirect tax revenue shocks have little effects. Compensation of public employees is equally not effective in stimulating the economy.
Subjects:Fiscal policy
government spending
net revenue
policy anticipation
structural vector autoregression
JEL:H30
E62
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank

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