The dynamic effects of fiscal policy : a FAVAR approach
Abstract
We implement a recently developed econometric model, the Factor Augmented VAR (FAVAR), to investigate the dynamic effects of government spending on key macroeconomic variables. In line with existing literature, we find that a government spending shock has positive effects on consumption and output. By splitting the sample in a pre-and post- Volcker period, we find that the positive effects of government spending on consumption and output over the whole sample are largely due to the first part of the sample.
Domains
Statistical Finance [q-fin.ST]
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