Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96376
Authors: 
Kuckuck, Jan
Westermann, Frank
Year of Publication: 
2013
Series/Report no.: 
Working Paper, Institute of Empirical Economic Research, University of Osnabrück 96
Abstract: 
The Structural Vector Auto-regression (SVAR) approach to estimating fiscal multipliers, following the seminal paper by Blanchard and Perotti (2002), has been widely applied in the literature. In our pa-per we discuss the interpretation of these estimates and suggest that they are more useful for fore-casting purposes than for policy advice. Our key point is that policy instruments often react to each other. We analyze a data set from the US and document that these interactions are economically and statistically significant. Increases in spending have been financed by subsequent increases in taxes. Increases in taxes have been complemented by additional spending cuts in subsequent quarters. In a counterfactual analysis we report fiscal multipliers that abstract from these dynamic responses of policy instruments to each other.
Subjects: 
Fiscal policy
government spending
net revenues
structural vector autoregression
JEL: 
E62
H20
H50
Document Type: 
Working Paper

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