1,720,987 research outputs found
It's not austerity. Or is it? Assessing the effect of austerity on growth in the European Union, 2010-15
No full textDoes one size fit all in the Euro Area? Some counterfactual evidence
No full textThis paper examines whether Euro Area countries would have faced a more favorable inflation output variability tradeoff without the Euro. We provide evidence that this claim is true for the periods of the Great Recession and the European Sovereign Debt Crisis. For the Euro Area as a whole, the deterioration of the tradeoff becomes insignificant with Draghi’s ‘whatever it takes’ announcement onwards. However, a more detailed analysis shows that the detrimental effect of the Euro is more severe and long-lasting for peripheral countries, pointing to structural differences among Euro Area countries as a key element of the detrimental effect of the Euro. We base our results on a novel empirical strategy that, consistently with monetary theory, models the joint determination of the variability of inflation and output conditional on structural supply shocks. Moreover, our findings are robust to potential endogeneity concerns related to adoption of the Euro
Identification of monetary policy in SVAR models: A data-oriented perspective
No full textIn the literature using short-run timing restrictions to identify monetary policy shocks in vector-auto-regressions (VAR) there is a debate on whether (i) contemporaneous real activity and prices or (ii) only data typically observed with high frequency should be assumed to be in the information set of the central bank when the interest rate decision is taken. This paper applies graphical modeling theory, a data-based tool, in a small-scale VAR of the US economy to shed light on this issue. Results corroborate the second type of assumption
Fiscal Foresight, Limited Information and the Effects of Government Spending Shocks
No full textWe quantify the impact of government spending shocks in the US. Thereby, we control for fiscal foresight, a specific limited information problem (LIP) by utilizing the narrative approach. Moreover, we surmount the generic LIP inherent in vector autoregressions (VARs) by a factor-augmented VAR (FAVAR) approach. We find that a positive deficit-financed defence shock raises output by more than in a VAR (e.g. 2.61 vs. 2.04 for peak multipliers). Furthermore, our evidence suggests that consumption is crowded in. These results are robust to variants of controlling for fiscal foresight and reveal the crucial role of the LIP in fiscal VARs
The effects of fiscal shocks in SVAR models: a graphical modelling approach
Full text linkWe apply graphical modelling theory to identify fiscal policy shocks in SVAR models of the US economy. Unlike other econometric approaches of which achieve identification by relying on potentially contentious a priori assumptions of graphical modelling is a data based tool. Our results are in line with Keynesian theoretical models, being also quantitatively similar to those obtained in the recent SVAR literature à la Blanchard and Perotti (2002), and contrast with neoclassical real business cycle predictions. Stability checks confirm that our findings are not driven by sample selection
Strategic monetary and fiscal policy interactions: an empirical investigation
Full text linkThis paper identifies leadership regimes in monetary-fiscal policy interactions in three countries, the UK, the US and Sweden. We specify a small-scale, structural general equilibrium model of an open economy and estimate it using Bayesian methods. We assume that the authorities can act strategically in a non-cooperative policy game, and compare different leadership regimes. We find that the model of fiscal leadership gives the best fit for the UK and Sweden, while in the US the Nash or non-strategic regime dominates. We assess the extent to which policy maker preferences reflect microfounded social preferences
Does one size fit all in the Euro Area? Some counterfactual evidence
Full text linkThis paper examines whether Euro Area countries would have faced a more favorable inflation output variability tradeoff without the Euro. We provide evidence supporting this claim for the periods of the Great Recession and the Sovereign Debt Crisis. The deterioration of the tradeoff becomes insignificant only after Draghi’s ‘whatever it takes’ announcement. Results show that the detrimental effect of the Euro is more severe for peripheral countries.We base our results on a novel empirical strategy that, consistent with monetary theory, models the joint determination of the variability of inflation and output conditional on structural supply and demand shocks
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