What Accounts for the Changes in U.S. Fiscal Policy Transmission?

By Florin O. Bilbiie, André Meier, Gernot J. Müller. Social Science Research Network, 2008

191 citations recorded by the source corpus.

Using vector autoregressions on U.S. time series for 1957-79 and 1983-2004, we find government spending shocks to have stronger effects on output, consumption, and wages in the earlier period. We try to account for this observation within a DSGE model featuring price rigidities and limited asset market participation. Specifically, we estimate the structural parameters of the model for both periods by matching impulse responses. Model-based counterfactual experiments suggest that most of the changes in fiscal policy transmission are accounted for by increased asset market participation and the more active monetary policy of the Volcker-Greenspan period.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/dfab8566256255e808d1acc102c2a45e289aa1c2

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In Economics and Econometrics

Citations in the corpus

Exchange Rate Regimes and Fiscal Multipliers (2013, background): “As in Bilbiie et al. (2008), differences between households are assumed to arise from their respective capacity to participate in asset markets, rather than from preferences.”
What fiscal policy is most effective? A Meta Regression Analysis (2015, background): “Ninth, time series from more recent years tend to yield lower multipliers, confirming the findings in Bilbiie et al. (2008) and Perotti (2005), but my sample does not cover an adequate portion of the effects of the stimulus packages in response to the financial crisis.”
Clearing Up the Fiscal Multiplier Morass (2011, background): “And many studies show that monetary policy behavior matters [Kim (2003), Bilbiie, Meier, and Müller (2008), Eggertsson (2009), Zubairy (2010), Christiano, Eichenbaum, and Rebelo (2011), and Davig and Leeper (2011)].”
Transmission of Government Spending Shocks in the Euro Area: Time Variation and Driving Forces (2010, unknown): “Fatás and Mihov (2001), Blanchard and Perotti (2002), Perotti (2005), Bénassy-Quéré and Cimadomo (2006), Caldara and Kamps (2008), and Mountford and Uhlig (2009).”
The Effects of Discretionary Fiscal Policy on Macroeconomic Aggregates: A Reappraisal (2011, unknown): “…Sample Identification strategy Output Consumption Employment Interest rate Comments Beetsma et al. (2008) Panel EU14 annual 1970-2004 recursive 1.2 Bilbiie et al. (2008) USA quarterly 1983-2004 recursive 0.94 + the reported multiplier is a 4 quarters cumulative response USA quarterly 1957-1979…”
Cross-Border Spillovers from Fiscal Stimulus (2009, unknown): “We also allow for the possibility that a fraction of households is excluded from financial markets, as in Erceg, Guerrieri, and Gust (2006) and Bilbiie, Meier, and Müller (2008), among others—a way to capture financial frictions which may motivate the resort to fiscal policy as a stabilization tool.”