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Fève, Patrick
and Sahuc, Jean-Guillaume
(2017)
In search of the transmission mechanism of fiscal policy in the Euro area.
Journal of Applied Econometrics, 32 (3).
pp. 704-718.
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Abstract
This paper applies the DSGE-VAR methodology to assess the size of fiscal multipliers in the data and the relative contributions of two transmission mechanisms of government spending shocks, namely hand-to-mouth consumers and Edgeworth complementarity. Econometric experiments show that a DSGE model with Edgeworth complementarity is a better representation of the transmission mechanism of fiscal policy as it yields dynamic responses close to those obtained with the flexible DSGE-VAR model (i.e. an impact output multiplier larger than one and a crowding-in of private consumption). The estimated share of hand-to-mouth consumers is too small to replicate the positive response of private consumption.
| Item Type: | Article |
|---|---|
| Language: | English |
| Date: | April 2017 |
| Refereed: | Yes |
| Uncontrolled Keywords: | Fiscal multipliers, hand-to-mouth, Edgeworth complementarity, DSGE-VAR, Euro area, Bayesian econometrics |
| JEL Classification: | C32 - Time-Series Models E32 - Business Fluctuations; Cycles E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 21 Jul 2016 11:45 |
| Last Modified: | 02 Apr 2021 15:53 |
| OAI Identifier: | oai:tse-fr.eu:30573 |
| URI: | https://publications.ut-capitole.fr/id/eprint/22247 |
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In search of the transmission mechanism of fiscal policy in the Euro area. (deposited 16 Mar 2015 14:51)
- In search of the transmission mechanism of fiscal policy in the Euro area. (deposited 21 Jul 2016 11:45) [Currently Displayed]
