Fiscal foresight and the effects of government spending

descriptionPublicationkeyboard_double_arrow_right Research , Article , Preprint 01 Jan 2010 Italy English Publisher:Dipartimento di Economia Marco Biagi – Università di Modena e Reggio Emilia

Authors: Forni, M.; Gambetti, L.;

handle: 11380/640823 , 11380/1292471

Fiscal foresight and the effects of government spending

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Abstract

We study the effects of government spending by using a structural, large dimensional, dynamic factor model. We find that the government spending shock is non-fundamental for the variables commonly used in the structural VAR literature, so that its impulse response functions cannot be consistently estimated by means of a VAR. Government spending raises both consumption and investment, with no evidence of crowding out. The impact multiplier is 1.7 and the long run multiplier is 0.6.

Country

Italy

Related Organizations

University of Modena and Reggio Emilia
Italy

Keywords

Structural factormodel, sign restrictions, fiscalpolicy, government spending shock, fundamentalness, non-fundamentalness, structural factor model, sign restrictions, fiscal policy, government spending shock, fundamentalness, non-fundamentalness., Política fiscal, Despeses públiques, structural factor model; sign restrictions; fiscal policy; government spending shock; fundamentalness; non-fundamentalness, structural factor model; sign restrictions; fiscal policy; government spending shock; fundamentalness; non-fundamentalness., fiscal policy; fundamentalness; government spending shock; non-fundamentalness; sign restrictions; structural factor model, jel: jel:E62, jel: jel:E32, jel: jel:C32

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