Fiscal Shocks and Asymmetric Effects: A Comparative Analysis

DUTH Research papers in Economics, Forthcoming

21 Pages Posted: 9 Dec 2013

See all articles by Ioannis Pragidis

Ioannis Pragidis

Democritus University of Thrace

Periklis Gogas

Democritus University of Thrace - Department of Economics

Vasilios Plakandaras

Democritus University of Thrace

Theophilos Papadimitriou

Department of Economics, Democritus University of Thrace

Date Written: October 15, 2013

Abstract

We empirically test the effects of unanticipated fiscal policy shocks on the growth rate and the cyclical component of real private output and reveal different types of asymmetries in fiscal policy implementation. The data used are quarterly U.S. observations over the period 1967:1 to 2011:4. In doing so, we use both a vector autoregressive and the novel support vector machines systems in order to extract the fiscal policy shocks series. The latter has never been used before in a similar macroeconomic setting. Within our research framework, in order to test the robustness of our results to alternative aggregate money supply definitions we use two alternative moentary aggregates. These are the commonly reported by central banks and policy makers simple sum monetary aggregates at the MZM level of aggregation and the alternative CFS Divisia MZM aggregate. From each of these four systems we extracted four types of shocks: a negative and a positive government spending shock and a negative and a positive government revenue shock. These eight different types of unanticipated fiscal policy shocks are next used to empirically examine their effects on the growth rate and the cyclical component of real private GNP in two sets of regressions: one that assumes only contemporaneous effects of the shocks on output and one that is augmented with four lags of each fiscal shock.

Keywords: Fiscal Policy; Asymmetric Effects; VAR

JEL Classification: E62

Suggested Citation

Pragidis, Ioannis and Gogas, Periklis and Plakandaras, Vasilios and Papadimitriou, Theophilos, Fiscal Shocks and Asymmetric Effects: A Comparative Analysis (October 15, 2013). DUTH Research papers in Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2365197 or http://dx.doi.org/10.2139/ssrn.2365197

Ioannis Pragidis

Democritus University of Thrace ( email )

University Campus
Department of Economics
Komotini, Rodopi 69100
Greece

Periklis Gogas (Contact Author)

Democritus University of Thrace - Department of Economics ( email )

Komotini, 69100
Greece

HOME PAGE: http://www.econ.duth.gr/personel/dep/gkogkas/index.en.shtml

Vasilios Plakandaras

Democritus University of Thrace ( email )

University Campus
Komotini, 69100
Greece

Theophilos Papadimitriou

Department of Economics, Democritus University of Thrace ( email )

University Campus
Komotini, 69100
Greece

HOME PAGE: http://econ.duth.gr/author/papadimi/

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