Is Fiscal Policy More Effective in Uncertain Times or During Recessions?
58 Pages Posted: 25 Aug 2017
Date Written: August 23, 2017
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: Suggested Citation