The macroeconomic effects of fiscal policy

By António Afonso, Ricardo M. Sousa. Social Science Research Network, 2012

375 citations recorded by the source corpus.

We investigate the macroeconomic effects of fiscal policy using a Bayesian Structural Vector Autoregression (B-SVAR) approach. We identify fiscal policy shocks via a partial identification scheme, but also: (i) include the feedback from government debt; (ii) look at the impact on the composition of output; (iii) assess the effects on asset markets; (iv) use quarterly data; and (v) analyse empirical evidence from the US, the UK, Germany and Italy. The results show that government spending shocks, in general, have a small effect on Gross Domestic Product (GDP); lead to important ‘crowding-out’ effects; have a varied impact on housing prices and generate a quick fall in stock prices. Government revenue shocks generate a mixed effect on housing prices and a small and positive effect on stock prices. The empirical evidence also suggests that it is important to explicitly consider the government debt dynamics in the model.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/b6b7326978eff50579f6bea5e22201475e5fd71b

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

Citations in the corpus

How Does Fiscal Consolidation Impact on Income Inequality (2013, neutral): “Afonso and Sousa (2012) show that government spending shocks generally have a small effect on GDP and lead to important crowding-out effects.”
Stock market response to monetary and fiscal policy shocks: Multi-country evidence (2013, neutral): “…1989; Gali and Gertler, 2007; Gertler and Gilchrist, 1993; Jensen and Johnson, 1995; Patelis, 1997; Thorbecke, 1997), only few investigate the effects of fiscal policy on stock markets (see, for example, Afonso and Sousa, 2011, 2012; Agnello and Sousa, 2010; Darrat, 1988; Jansen et al., 2008).”
Are Islamic finance innovations enough for investors to escape from a financial downturn? Further evidence from portfolio simulations (2013, background): “…Economics ISSN 0003–6846 print/ISSN 1466–4283 online 2013 Taylor & Francis 3412 http://www.tandfonline.com http://dx.doi.org/10.1080/00036846.2012.707776 significant rise in unemployment (Shiller, 2008; Afonso and Sousa, 2011, 2012; Agnello and Sousa, 2011, 2012; Agnello et al., 2012).”
The Impact of Fiscal Policy on Economic Activity Over the Business Cycle - Evidence from a Threshold VAR Analysis (2011, methodology): “Tax cuts increase GDP in the studies by Höppner (2001) and Bode et al.(2006), while Heppke-Falk et al. (2010) and Afonso and Sousa (2009) find contractionary effects.”