Is Fiscal Policy More Effective in Uncertain Times or During Recessions?

58 Pages Posted: 25 Aug 2017

Date Written: August 23, 2017

Abstract

This paper estimates the impact of government spending shocks on economic activity during periods of high and low uncertainty and during periods of boom and recession. We find that government spending shocks have larger impacts on output in booms than in recessions and larger impacts during tranquil times than during uncertain times. The results suggest that confidence plays an important role in explaining this differential impact.

Keywords: fiscal policy, vector autoregressions, uncertainty

JEL Classification: E62, E32, C32

Suggested Citation

Alloza, Mario, Is Fiscal Policy More Effective in Uncertain Times or During Recessions? (August 23, 2017). Banco de Espana Working Paper No. 1730, Available at SSRN: https://ssrn.com/abstract=3024538 or http://dx.doi.org/10.2139/ssrn.3024538

Mario Alloza (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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