Canale, Rosaria Rita and Foresti, Pasquale and Marani, Ugo and Napolitano, Oreste (2007): On Keynesian effects of (apparent) non-Keynesian fiscal policies.
Download (452kB) | Preview
The aim of this paper is to evaluate the robustness of the theory that claims restrictive effects of expansionary fiscal policy. It shows that such so-called “non-Keynesian effects” may arise from synchronous and opposite monetary policy interventions. The paper demonstrates this conclusion through a stylized model – supported by an empirical investigation on ECB and FED reaction functions – in which Central Banks consider deficit spending as an element that generates inflation expectations. Econometric analysis also shows that the ECB reacts asymmetrically to deficit spending variations while the FED has a linear reaction to this indicator.
|Item Type:||MPRA Paper|
|Institution:||Dipartimento di analisi dei processi socio-economici, produttivi e territoriali. Facoltà di Economia. Università di Napoli "Federico II"|
|Original Title:||On Keynesian effects of (apparent) non-Keynesian fiscal policies|
|Keywords:||Fiscal policy; Monetary policy; Central Banks Policy strategies|
|Subjects:||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
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
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 > E62 - Fiscal Policy
|Depositing User:||Rosaria Rita Canale|
|Date Deposited:||28. Jun 2007|
|Last Modified:||13. Feb 2013 05:48|
Adam K. and Billi R., 2006, “Monetary Conservatism and Fiscal Policy”, European Central Bank Working Paper Series n°663. Ahrend R., Catte P. and Price R., (2006), “Interactions Between Monetary and Fiscal Policy: How Monetary Conditions Affect Fiscal Consolidations”, OECD Economics Department Working paper n°521. Alesina, A. and Perotti R. (1995), “Fiscal Expansions and Adjustments in OECD Countries”, Economic Policy 21, 205-248. Alesina, A. and Perotti R. (1997), “Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects”, International Monetary Fund Staff Papers 44, 210-48. Alesina, A., and Ardagna A. (1998), “Tales of Fiscal Contractions”, Economic Policy 27, 487-545. Allsopp C. (2002), “The Future of Macroeconomic Policy in the European Union”, Speech to the Austrian Institute of Economic Research, January. Allsopp C. and Vines D. (2000), “The Assessment: Macroeconomic Policy”, Oxford Review of Economic Policy, vol.16, n°4. Allsopp C. and Vines D. (2005), “The Macroeconomic Role of Fiscal Policy”, Oxford Review of Economic Policy, vol.21, n°4. Ardagna, S. (2004), “Financial Markets Behavior around Episodes of Large Changes in the Fiscal Stance”, Harvard University, mimeo. Arestis P. and Sawyer M. (2003), “Reinventing Fiscal Policy”, The Levy Economic Institute working paper n°381. Barrel R., Gottschalk S., Hurst J. and van Welsum D. (2002), “Macroeconomic Policy in Europe-Experiments with Monetary Responses, Fiscal Impulses and Labour Market Innovations” (London: National Institute of Economic and Social Research). Barro R. (1974), “Are government bonds net wealth?” in Journal of Political Economy, 82. Blanchard, O. and Perotti R. (1999) and (2002), “An empirical characterization of the dynamic effects of changes in government spending and taxes on output”. NBER Working Paper n.7269, and in Quarterly Journal of Economic Theory, vol. 115, 89-117. Bryant R. C., Hooper P. and Mann C.L. (1993), “Evaluating Policy Regimes: New Research in Empircal Macroeconomics. Washington: Brookings Institution. Burger P. (2005), “Fiscal Sustainability: The Origin, Development and Nature of an Ongoing 200-year Old Debate”, Institut for World Economics and International Management, n°98. Caldara D. and Kamps C (2006), “What Do We Know about the Effects of Fiscal Policy Shocks? A Comparative Analysis”, Mimeo. Canzoneri, Cumby and Diba (2002), “Should the European Central Bank and Federal Reserve Concerned About Fiscal Policy?”, Mimeo. Capet s. (2004), “The Efficiency of Fiscal Policies: A Survey of the Literature”, CEPII Working Paper N°2004-11. Carlberg M. (2004), “Monetary and Fiscal Policy Interactions in the Euro Area”, Hamburg University. Cobham D.(2006), “Using Taylor Rule tAssess The Relative Activism of the European Central Bank”, the Bank of England and the Federal Reserve Board, Center for Dynamic Macroeconomic Analysis Conference Papers N°06/02. Cour P., Dubois E., Mahfouz S. and Pisani-Ferry J. (1996), “The Cost of Fiscal Retrenchment Revisited: How Strong Is The Evidence?”, CEPII Working Paper n°16. Creel J., Ducoudre’ B., Mathieu C., Saraceno F. and Sterdyniak H., 2004, “Should We Forget Fiscal Stabilisation Policies ? A Critical Survey Of The New Anti Keynesian View on Public Finances”, OFCE. Dalsgaard T., Christophe A. and Richardson P. (2001), “Standard Shocks in the OECD Interlink Model”, OECD Working Paper 306 (Paris: Organization for Economic Cooperation and Development). European Central Bank (2001),” Fiscal Policies and Economic Growth”, Monthly Bulletin, August. European Central Bank (2004), “Fiscal Policy Influences on Macroeconomic Stability And Prices”, Monthly Bulletin, April. European Central Bank (2006), “The Predictability of the ECB’s Monetary Policy, Monthly Bulletin, January. European Central Bank (2006), “Fiscal Policies And Financial Markets”, Monthly Bulletin, February. Fatas A. and Mihov I. (2001a), “Fiscal policy and Business Cycles: An Empirical Investigation. Moneda y Credito, vol 212, 167-210. Fatas A. and Mihov I. (2001b), “The Effects of Fiscal policy on Consumption and Empolyment: Theory and Evidence”, CEPR Discussion Paper. No. 2760. Fitoussi J.P. (2002),” The Stability (and Growth) Pact and Monetary Policy”, European Parliament, Committee For Economic And Monetary Affairs, Briefing Paper N°4. Fitoussi J.P. (2004), “Reform of the Stability and Growth Pact”, European Parliament, Committee For Economic and Monetary Affairs, Briefing Paper N°2. Giavazzi F. and Pagano M. (1990) “Can severe fiscal contractions be expansionary? Tales of two small European countries”, NBER working paper series N°3372. Giavazzi F. Iappelli T., Pagano M. (1999), “Searching for non-Keynesian effects of fiscal policy changes”, CSEF Center for Studies in Economics and Finance, WP n.16. Giavazzi F. Iappelli T., Pagano M. (2000), “Searching for non-linear effects of fiscal policy: evidence from industrial and developing countries”, NBER working paper 7460. Giavazzi F. Iappelli T., Pagano M. Benedetti M., (2005), Searching for non monotonic effects of fiscal policy: new evidence, NBER workig paper 11593. Giavazzi F. Pagano M. (1995), “Non-Keynesian effects of fiscal policy changes. International evidence and the Swedish experience”, NBER working paper series N°5332 also in Swedish Economic Policy Review, may, 1996. Hemming R., Kell M. and Mahfouz S. (2002),” The Effectiveness of Fiscal Policy in Stimulating Economic Activity. A Review Of Literature”, IMF Working Paper n°208. Hetzel R.L. (2000), “The Taylor Rule: Is It a Useful Guide to Understanding Monetary Policy?, Federal Reserve Bank Of Richmond Economic Quarterly, Vol 86-2. Hunt B. and Laxton D. (2002), “Some Simulation Properties of the Major Euroarea Economics in MULTIMOD”, paper presented at the CEPR/ZEI Conference, Bonn, June. Hjelm G. (2002), “Is Private Consumption Growth Higher (Lower) During Periods of Fiscal Contractions Expansions?”, Journal of Macroeconomic, 24, 17-39. International Monetary Fund (1996), World Economic Outlook, May 1996: A Study by the Staff of the International Monetary Fund, World Economic and Financial Surveys (Washington). Isaac A.G. (2005),” Monetary and Fiscal Interactions. Short Run and Long Run Implications”, The American University. Issing O. (2005), “The Role Of Fiscal and Monetary Policies in the Stabilisation of the Economic Cycle”, Mexico City, November. Kamps C. (2001), ”Public Investment and Fiscal Policy”, prepared by the Fiscal Affairs Department and Review Department, March 12. King M. (1995), “Commentary: Monetary Policy Effects of Greater Fiscal Discipline”, Mimeo. Kiviet J.F. (1995), “On Bias, Inconsistency and Efficiency of Some Estimators in Dynamic Panel Data Models”, Journal of Econometrics, 68; 53-78. Krugman P. (2005), “Is Fiscal Policy Poised for a Comeback? Oxford Review of Economic Policy. Kuttner K. N. and Posen A. S. (2002), “Passive Savers and Fiscal Policy Effectiveness in Japan”. Paper presented at the conference of CEPR-CIRJIE-NBER, Tokio, December. Mckibbin W.J. (1996), “Empirical Evidence on International Economic Policy Coordination”, in Handbook of Macroeconomic policy in Open Economies, ed by Michele Fratianni, Dominick Salvatore and Jurgen von Hagen (Westport, Connecticut and London: Freenwood Press). Meyer L.H. (2000), “How Does a Surplus Affect the Formulation and Conduct of Monetary Policy” Mimeo. Mountfold A. and Uhlig H. (2002), “What are the Effects of Fiscal Policy Shocks? CEPR Discussion Paper 3338, London. Nordhaus W. (1994), “Policy Games: CoordinationaAnd Independence in Monetary and Fiscal Policies”, Brookings Papers On Economic Activity, n°2. Peden G.C. (1984), “The “Treasury View” on Public Works and Employment in the Interwar Period”, The Economic History Review, May. Perotti R. (2002), “Estimating the Effects of Fiscal Policy in OECD Countries. ECB Working Paper 168. European Central Bank. Revised version October 2004. Prammer D. (2004), “Expansionary Fiscal Consolidations? An appraisal of the Literature on Non-Keynesian Effects of Fiscal Policy and a Case Study for Austria”, Mimeo. Ramey V.A. and Shapiro M.D. (1998). Costly Capital Reallocation and the Effects of Government Spending. Carnagie-Rochester Conference Series on Public Policy 48 (June): 145-194. Richardson P. (1998), “The Structure and Simulation Properties of OECD’s Interlink Model”, OECD Economic Review. No. 10 (Spring). Ridder G. and Vansbeek T.J. (1990), “Dynamic Models for Panel Data”, in R. van der Ploeg, ed. Advanced Lectures in Quantitative Economics, Academic Press, New York. Roeger W. and Jan in’t Veldt (2002), “Some Selected Simulations Experiments with the European Commission’s QUEST Model”, paper presented at the CEPR/ZEI Conference, Bonn, June. Romer D. (2000), “Keynesian Macroeconomics Without the LM Curve”, Journal Of Economic Perspectives, n°2, vol.14. Romer D. (2006), “Short Run Fluctuations”, University Of California, Berkeley. Sauer S. and Sturm J.E. (2003), “Using Taylor Rules to Understand ECB Monetary Policy”, Cesifo Working Paper n°1110. Surico P. (2003), “Asymmetric Reaction Functions for the Euro Area”, Mimeo. Taylor J.B. (1997), “The Policy Rule Mix. A Macroeconomic Policy Evaluation” Mimeo Ullrich k. (2003), “A Comparison Between the Fed and the Ecb: Taylor Rules”, Zew Discussion Paper n°03-19. Wallis K. W. (2004), “Comparing Empirical Models of the Euro Economy”,. No. 21, 735-758. Wyplosz C. (2006), “European Monetary Union: The Dark Sides of a Major Success”, Economic Policy, April.