Pereira, Manuel C (2008): Empirical evidence on the stabilizing role of fiscal and monetary policies in the US.
Download (310kB) | Preview
I apply SVAR tools and counterfactual simulation techniques to study the (de)stabilizing role of monetary and fiscal policies in the US, using quarterly data from 1955 to 2005. Monetary and fiscal disturbances contributed much less to output volatility in the second part of the sample. This result stems from their smaller impact and, to a lesser extent, from a decline in the respective variance. Systematic taxes net of transfers were the most important stabilizing force in the course of postwar recessions until the eighties. Monetary policy had a comparatively smaller role in offsetting the downturns in activity at those episodes. Net taxes have, however, suffered a marked lost of effectiveness in recent decades.
|Item Type:||MPRA Paper|
|Original Title:||Empirical evidence on the stabilizing role of fiscal and monetary policies in the US|
|Keywords:||fiscal policy, monetary policy, stabilization, structural vector autoregression|
|Subjects:||E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy
|Depositing User:||Manuel Coutinho Pereira|
|Date Deposited:||23. Sep 2009 11:41|
|Last Modified:||12. Feb 2013 22:12|
Ahmed, S., A. Levin, and A.Wilson (2004). Recent US macroeconomic stability: good policies, good practices or good luck? Review of Economics and Statistics 86 (3), 824-832.
Auerbach, A. (2002). Is there a role for discretionary fiscal policy? Working Paper 9306, National Bureau of Economic Research.
Auerbach, A. and D. Feenberg (2000). The significance of federal taxes as automatic stabilizers. Journal of Economic Perspectives 14 (3), 37-56.
BEA (2005). Government transactions. Methodology papers: U.S. national income and product accounts, Bureau of Economic Analysis.
Bernanke, B. and A. Blinder (1992). The federal funds rate and the channels of monetary transmission. The American Economic Review 82 (4), 901-921.
Bernanke, B., M. Gertler, and M.Watson (1997). Systematic monetary policy and the effect of oil price shocks. Economic Research Reports 25, C.V. Starr Center for Applied Economics.
Blanchard, O. (1984). Current and anticipated deficits, interest rates and economic activity. Working Paper 1265, National Bureau of Economic Research.
Blanchard, O. (1989). A traditional interpretation of macroeconomic fluctuations. American Economic Review 79 (5), 1046-1064.
Blanchard, O. and R. Perotti (2002). An empirical characterization of the dynamic effects of changes in government spending and taxes on output. Quarterly Journal of Economics 117 (4), 1329-1368.
Blanchard, O. and M. Watson (1984). Are business cycles all alike? Working Paper 1392, National Bureau of Economic Research. Bohn, H. (1998). The behavior of U.S. public debt and deficits. The Quarterly Journal of Economics 113 (3), 949-963.
Bovin, J. (2006). Has monetary policy changed? Evidence from drifting coefficients and real time data. Journal of Money Credit and Banking 38 (5), 1149-1173.
Bovin, J. and M. Giannoni (2006). Has monetary policy become more effective? Review of Economics and Statistics 88 (3), 445-462.
Canova, F. (2009). What explains the great moderation in the US? A structural analysis.
Journal of the European Economic Association 7 (4), 697-721.
Canzoneri, M., R. Cumby, and B. Diba (2002). Should the European Central Bank and the Federal Reserve be concerned about fiscal policy? Federal Reserve Bank of Kansas City Symposium on "Rethinking Stabilization Policy", 333-389.
Christiano, L., M. Eichenbaum, and C. Evans (1996). The effects of monetary policy shocks: Evidence from the flow of funds. The Review of Economics and Statistics 78 (1), 16-34.
Christiano, L., M. Eichenbaum, and C. Evans (1999). Monetary policy shocks: What have we learned and to what end? In J. Taylor and M. Woodford (Eds.), Handbook of Macroeconomics, Volume 1A, pp. 91-157. Amsterdam: Elsevier Science BV.
Clarida, R., J. Galí, and M. Gertler (2000). Monetary policy rules and macroeconomic stability: Evidence and some theory. The Quarterly Journal of Economics 115 (1), 147-180.
Cohen, D. and G. Follete (2000). The automatic fiscal stabilizers: Quietly doing their thing. Federal Reserve Bank of New York Economic Policy Review 6, 35-68.
Estima (2007). RATS version 7 User Guide. Evanston, Illinois: Estima.
Favero, C. and F. Giavazzi (2007). Debt and the effects of fiscal policy. Working Paper 12822, National Bureau of Economic Research.
Giorno, C., P. Richardson, D. Roseveare, and P. van den Noord (1995). Estimating potential output, output gaps and structural budget balances. Economics Department Working Papers 152, OECD.
Girouard, N. and C. André (2005). Measuring cyclically adjusted budget balances for OECD countries. Economics Department Working Papers 21, OECD.
Johnston, D., J. Parker, and N. Souleles (2006). Household expenditure and the Income Tax rebates of 2001. American Economic Review 96 (5), 1589-1610.
Office for Personnel Management (2002). Costs of administering the Federal Wage System. Report to Congress, available at www.opm.gov.
Perotti, R. (2004). Estimating the effects of fiscal policy in OECD countries. Proceedings, Federal Reserve Bank of San Francisco.
Perotti, R. (2007). In search of the transmission mechanism of fiscal policy. Working Paper 13143, National Bureau of Economic Research.
Primiceri, G. (2005). Time varying structural vector autoregressions and monetary policy. Review of Economic Studies 72 (3), 821-852.
Ramey, V. (2008). Identifying government spending shocks: It’s all in the timing. Working paper.
Ramey, V. and M. Shapiro (1998). Costly capital reallocation and the effects of government spending. Carnegie Rochester Series in Public Policy 48, 145-194.
Romer, C. and D. Romer (1994). What ends recessions? Working Paper 4765, National Bureau of Economic Research.
Romer, C. and D. Romer (2009a). Do tax cuts starve the beast? The effect of tax changes on government spending. Brookings Papers on Economic Activity. forthcoming.
Romer, C. and D. Romer (2009b). The macroeconomic effects of tax changes: Estimates based on a new measure of fiscal shocks. American Economic Review. forthcoming. Sims, C. and T. Zha (1998). Does monetary policy generate recessions? Working Paper 12, Federal Reserve Bank of Atlanta.
Sims, C. and T. Zha (2006). Where there regime switches in us monetary policy. American Economic Review 96 (1), 54-81.
Smith, S. (1982). Pay, pensions, and unemployment in government. American Economic Review 72 (2), 273-277.
Stock, J. and M. Watson (2002). Has the business cycle changed and why? Working Paper 9127, National Bureau of Economic Research.
Tax Foundation (2007). Federal individual income tax rates history. Tables, available at www.taxfoundation.org.
Taylor, J. (1993). Discretion versus policy rules in practice. Carnegie-Rochester Series in Public Policy.
Taylor, J. (2000). Reassessing discretionary fiscal policy. The Journal of Economic Perspectives 14 (3), 21-36.
van den Noord, P. (2000). The size and role of automatic fiscal stabilizers in the 1990s and beyond. Economics Department Working Papers 230, OECD.
von Furstenberg, G., R. Green, and J. Jeong (1986). Tax and spend, or spend and tax? Review of Economics and Statistics 68 (2), 179-188.
Available Versions of this Item
- Empirical evidence on the stabilizing role of fiscal and monetary policies in the US. (deposited 23. Sep 2009 11:41) [Currently Displayed]