Business and Economic Horizons

  Previous Article | Back to Volume | Next Article
  Abstract | References | Citation | Download | Preview | Statistics
Volume 9
Issue 1
Online publication date 2013-04-01
Title The effects of discretionary fiscal policy on macroeconomic aggregates
Author Stevan Gaber, Ilija Gruevski, Vasilka Gaber
We review the evidence on the practice and effects of discretionary fiscal policy, particularly in the context of recent efforts to stimulate the economy, reaching two main conclusions. First, policy interventions have increased in this decade, pre-dating the 2009 stimulus. Second, despite a large economic literature on the topic, the state of theory and evidence is not as "shovel ready" as one would like. Although consumption and investment clearly respond to tax incentives and structural vector autoregressions show that lower taxes and higher government purchases can boost output, it is difficult to apply the findings in the current context, in part because multipliers and policy lags are likely to vary with economic conditions. This paper surveys the theoretical predictions and recent empirical Vector Autoregression (VAR) evidence on the short-run effects of discretionary fiscal policy on macroeconomic aggregates.
Burnside, C., Eichenbaum, M., Fisher, J., 2007. “Fiscal shocks and their consequences,” Journal of Economic theory, Vol.115(1), pp.89-117

Callegari, G., 2007. Fiscal policy and consumption, PhD thesis, Florence: European University Institute 

Christiano, L., Eichenbaum, M., Rebelo, S., 2009. “When is the government spending multiplier large,” NBER Working Papers 15394, National Bureau of Economic Research, Inc.

Hebous, Sh., 2009. “The effects of discretionary fiscal policy on macroeconomic aggregates: A reappraisal,” MPRA Paper 23300, University Library of Munich, Germany, revised

IMF, 2008. “Fiscal policy for the crisis,” IMF Staff Position Note, SPN/08/01

IMF, 2009. “Fiscal implications of the global economic and financial crisis,” IMF Staff Position Note, SPN/09/13

Pappa, E., 2009. “The effects of fiscal shocks on employment and real wages,” International Economic Review, Vol.50(1), pp.217-44

Patinkin, D., 1982. Anticipations of the General Theory? and other essays on Keynes, Chicago: University of Chicago Press

Keywords Macroeconomic models, VAR, fiscal policy, macroeconomic aggregates, real bussines cycles theory
Pages 32-39
Download Full PDF Download
  Previous Article | Back to Volume | Next Article
Search in articles
Journal Published articles
BEH 626
Journal Hits
BEH 1506110
Journal Downloads
BEH 47839
Total users online -