Are There Asymmetries in Fiscal Policy Shocks?

“Are there Asymmetries in Fiscal Policy Shocks”, with I. Pragidis, Journal of Economic Studies, Vol. 42(2), pp. 303-321, 2015.

24 Pages Posted: 22 Jun 2017

See all articles by Periklis Gogas

Periklis Gogas

Democritus University of Thrace - Department of Economics

Ioannis Pragidis

Democritus University of Thrace

Date Written: June 21, 2015

Abstract

We empirically test the effects of unanticipated positive versus negative fiscal policy shocks on the growth rate and the cyclical component of real private output. In doing so, we employed two alternative approaches. The first one uses vector autoregressive systems in order to construct the identified fiscal policy shocks. From each employed 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 different types of unanticipated fiscal shocks were used next to empirically examine their effects on the growth rate and 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. In the alternative approach we measure the impact of positive versus negative fiscal policy shocks on the real activity of the U.S economy via Generalized Impulse Response Functions in a Threshold VAR framework. The TVAR method reveals strong statistically significant non-linearities while the first method reports only weak evidences.

Keywords: Fiscal Policy, Asymmetric Effects, VAR, TVAR

JEL Classification: E62

Suggested Citation

Gogas, Periklis and Pragidis, Ioannis, Are There Asymmetries in Fiscal Policy Shocks? (June 21, 2015). “Are there Asymmetries in Fiscal Policy Shocks”, with I. Pragidis, Journal of Economic Studies, Vol. 42(2), pp. 303-321, 2015. . Available at SSRN: https://ssrn.com/abstract=2990337

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

Ioannis Pragidis

Democritus University of Thrace ( email )

University Campus
Department of Economics
Komotini, Rodopi 69100
Greece

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