The effects of discretionary fiscal policy on macroeconomic aggregates

• Authors: Stevan Gaber , Ilija Gruevski , Vasilka Gaber
• Languages of publication: EN

Abstracts

EN

We review the evidence on the practice and effects of discretionary fiscal policy, particularly in the context of recent efforts to stimulate the economy, reaching two main conclusions. First, policy interventions have increased in this decade, pre-dating the 2009 stimulus. Second, despite a large economic literature on the topic, the state of theory and evidence is not as "shovel ready" as one would like. Although consumption and investment clearly respond to tax incentives and structural vector autoregressions show that lower taxes and higher government purchases can boost output, it is difficult to apply the findings in the current context, in part because multipliers and policy lags are likely to vary with economic conditions. This paper surveys the theoretical predictions and recent empirical Vector Autoregression (VAR) evidence on the short-run effects of discretionary fiscal policy on macroeconomic aggregates.

Keywords

EN

Macroeconomic models, VAR, fiscal policy, macroeconomic aggregates, real bussines cycles theory

• Publisher: Prague Development Center, Czech Republic
• Journal: Business and Economic Horizons
• Year: 2013
• Volume: 9
• Issue: 1
• Pages: 32-39

Dates

published

2013-04-01

Contributors

author

Stevan Gaber

author

Ilija Gruevski

author

Vasilka Gaber

References

• Burnside, C., Eichenbaum, M., Fisher, J., 2007. “Fiscal shocks and their consequences,” Journal of Economic theory, Vol.115(1), pp.89-117
• Callegari, G., 2007. Fiscal policy and consumption, PhD thesis, Florence: European University Institute
• Christiano, L., Eichenbaum, M., Rebelo, S., 2009. “When is the government spending multiplier large,” NBER Working Papers 15394, National Bureau of Economic Research, Inc.
• Hebous, Sh., 2009. “The effects of discretionary fiscal policy on macroeconomic aggregates: A reappraisal,” MPRA Paper 23300, University Library of Munich, Germany, revised
• IMF, 2008. “Fiscal policy for the crisis,” IMF Staff Position Note, SPN/08/01
• IMF, 2009. “Fiscal implications of the global economic and financial crisis,” IMF Staff Position Note, SPN/09/13
• Pappa, E., 2009. “The effects of fiscal shocks on employment and real wages,” International Economic Review, Vol.50(1), pp.217-44
• Patinkin, D., 1982. Anticipations of the General Theory? and other essays on Keynes, Chicago: University of Chicago Press

Identifiers

DOI

http://dx.doi.org/10.15208/beh.2013.4