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In search of the transmission mechanism of fiscal policy in the euro area

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dc.contributor.author Fève, Patrick
dc.contributor.author Sahuc, Jean-Guillaume
dc.date.accessioned 2016-09-19T13:34:19Z
dc.date.available 2016-09-19T13:34:19Z
dc.date.issued 2016-09-19
dc.identifier.uri http://hdl.handle.net/10230/27302
dc.description.abstract This paper applies the DSGE-VAR methodology to assess the size of fiscal multipliers in the data and the relative contributions of two transmission mechanisms of government spending shocks, namely hand-to-mouth consumers and Edgeworth complementarity. Econometric experiments show that a DSGE model with Edgeworth complementarity is a better representation of the transmission mechanism of fiscal policy as it yields dynamic responses close to those obtained with the flexible DSGE-VAR model (i.e. an impact output multiplier larger than one and a crowding-in of private consumption). The estimated share of hand-to-mouth consumers is too small to replicate the positive response of private consumption.
dc.description.sponsorship The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries ADEMU Working Paper Series;28
dc.rights This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed.
dc.rights.uri https://creativecommons.org/licenses/by/4.0/
dc.title In search of the transmission mechanism of fiscal policy in the euro area
dc.type info:eu-repo/semantics/workingPaper
dc.subject.keyword Fiscal multipliers
dc.subject.keyword Hand-to-mouth
dc.subject.keyword Edgeworth complementarity
dc.subject.keyword DSGE-VAR
dc.subject.keyword Euro area
dc.subject.keyword Bayesian econometrics
dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
dc.rights.accessRights info:eu-repo/semantics/openAccess


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