Estimating US Fiscal and Monetary Interactions: From Volcker Chairmanship to the Great Recession

45 Pages Posted: 1 Nov 2013

See all articles by Eddie Gerba

Eddie Gerba

Banco de España; London School of Economics & Political Science (LSE); CES Ifo Institute; European Central Bank

Klemens Hauzenberger

Deutsche Bundesbank

Date Written: August 30, 2013

Abstract

Locating the appropriate degree of interaction between fiscal and monetary policy plays an important role in ensuring economic stability. Their joint impact is, however, still unclear. We observe significant differences in the transmission of shocks, in particular between the Great Recession and the Great Moderation, and find a high degree of interactions between monetary and fiscal policy. Further, government revenues largely influence decisions on spending, while spending does not influence tax decisions. Spending stimuli are more effective in expanding output than tax cuts. Under certain conditions regarding private agent expectations, spending increases can result in high and persistent growth.

Keywords: time varying parameter VAR, sign restrictions, fiscal multipliers, Great Recession

JEL Classification: C11, C32, E52, E61, E62, E63

Suggested Citation

Gerba, Eddie and Hauzenberger, Klemens, Estimating US Fiscal and Monetary Interactions: From Volcker Chairmanship to the Great Recession (August 30, 2013). Available at SSRN: https://ssrn.com/abstract=2347699 or http://dx.doi.org/10.2139/ssrn.2347699

Eddie Gerba (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain
(+34)917088132 (Phone)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

CES Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Klemens Hauzenberger

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
55
Abstract Views
476
rank
383,326
PlumX Metrics