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Erscheinungsjahr: 
2011
Schriftenreihe/Nr.: 
IES Working Paper No. 16/2011
Verlag: 
Charles University in Prague, Institute of Economic Studies (IES), Prague
Zusammenfassung: 
We use a threshold VAR analysis to study whether the effects of fiscal policy on economic activity differ depending on financial market conditions. In particular, we investigate the possibility of a non-linear propagation of fiscal developments according to different financial market stress regimes. More specifically we employ a quarterly dataset, for the U.S., the U.K., Germany and Italy, for the period 1980:4-2009:4, encompassing macro, fiscal and financial variables. The results show that (i) the use of a nonlinear framework with regime switches is corroborated by nonlinearity tests; (ii) the responses of economic growth to a fiscal shock are mostly positive in both financial stress regimes; (iii) financial stress has a negative effect on output growth and worsens the fiscal position; (iv) the nonlinearity in the response of output growth to a fiscal shock is mainly associated with different behaviour across regimes; (v) the size of the fiscal multipliers is higher than average in the last crisis.
Schlagwörter: 
fiscal policy
financial markets
threshold VAR
JEL: 
E62
G15
H60
Dokumentart: 
Working Paper

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