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Title: | Estimating the effects of fiscal policy under the budget constraint |
Author: | Claeys, Peter |
Keywords: | Política fiscal Deute públic Impostos Anàlisi d'impacte econòmic Finances públiques Fiscal policy Public debt Taxation Economic impact analysis Public finance |
Issue Date: | 2007 |
Publisher: | Universitat de Barcelona. Institut de Recerca en Economia Aplicada Regional i Pública |
Series/Report no: | [WP E-IR07/15] |
Abstract: | I reconsider the short-term effects of fiscal policy when both government spending and taxes are allowed to respond to the level of public debt. I embed the long-term government budget constraint in a VAR, and apply this common trends model to US quarterly data. The results overturn some widely held beliefs on fiscal policy effects. The main finding is that expansionary fiscal policy has contractionary effects on output and inflation. Ricardian effects may dominate when fiscal expansions are expected to be adjusted by future tax rises or spending cuts. The evidence supports RBC models with distortionary taxation. We can discard some alternative interpretations that are based on monetary policy reactions or supply-side effects. |
It is part of: | IREA – Working Papers, 2007, IR07/15 |
URI: | http://hdl.handle.net/2445/63557 |
ISSN: | 2014-1254 |
Appears in Collections: | Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA)) |
Files in This Item:
File | Description | Size | Format | |
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IR07-015_Claeys.pdf | 570.79 kB | Adobe PDF | View/Open |
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