Do We Reject Restrictions Identifying Fiscal Shocks? Identification Based on non-Gaussian Innovations

29 Pages Posted: 4 Mar 2021

See all articles by Madina Karamysheva

Madina Karamysheva

National Research University Higher School of Economics

Anton Skrobotov

Russian Academy of National Economy and Public Administration under the President of the Russian Federation (RANEPA) - Department of Economics

Date Written: January 11, 2021

Abstract

This paper is devoted to fiscal shock identification based on the assumption of nonGaussianity of the errors, which can be easily tested. We use additional co-kurtosis conditions in GMM estimation of the AB-model to estimate the dynamic effects of fiscal shocks and find fiscal multipliers in the U.S. economy. Our approach results in higher tax multipliers on average relative to Blanchard and Perotti 2002 and Leeper, Walker, and Yang 2013. Testing the restrictions, we are not able to reject them in Blanchard and Perotti 2002 model. Once we control for fiscal foresight, we can reject restrictions both individually and all together. Finally, comparing elasticities of tax revenue to output to elasticities found in the literature, rejecting most of them, we are not able to reject the one of Caldara and Kamps 2017.

Keywords: fiscal multipliers, SVAR, identification, non-Gaussian time series, GMM

JEL Classification: C32, ะก52, E62, H30

Suggested Citation

Karamysheva, Madina and Skrobotov, Anton, Do We Reject Restrictions Identifying Fiscal Shocks? Identification Based on non-Gaussian Innovations (January 11, 2021). Available at SSRN: https://ssrn.com/abstract=3764888 or http://dx.doi.org/10.2139/ssrn.3764888

Madina Karamysheva

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Anton Skrobotov (Contact Author)

Russian Academy of National Economy and Public Administration under the President of the Russian Federation (RANEPA) - Department of Economics ( email )

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