Impacts of Fiscal Policy Shocks in Finland

Unal, Umut (2014): Impacts of Fiscal Policy Shocks in Finland. Published in: The Empirical Economics Letters , Vol. 9, No. 13 (1 September 2014): pp. 1017-1024.

Abstract

This paper focuses on the responses of main macroeconomic indicators to the tax and spending shocks in Finland using a structural VAR approach. The results suggest that GDP increases in response to an increase in government spending whereas it falls in response to an increase in total net taxes. The response of investment to both government spending and total net tax shock is consistent with the Keynesian theory. The results also indicate that the relative impact of government spending on output is lower than that of total net taxes.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fiscal Policy; Government Spending; VAR
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H20 - General; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General

References

Alesina, A., Ardagna, S., Perotti, R., Schiantarelli, F., 2002, Fiscal Policy, Profits and Investment, American Economic Review, 92 (3), 571-589.

Blanchard, O., Perotti R., 2002, An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output, Quarterly Journal of Economics 177, 1329-1368.

Burriel, P., De Castro, F., Garrote, D., Gordo, E., Paredes, J., Perez, J. 2010, Fiscal Policy Shocks in the Euro Area and the US: An Empirical Assessment, Fiscal Studies, 31 (2), 251-285.

De Castro, F. and de Cos, P. 2008, The Economic Effects of Fiscal Policy: The Case of Spain, Journal of Macroeconomics, 30, 1005-1028.

Heppke-Falk, K., Tenhofen, J., and Wolff, G., 2006, The Macroeconomic Effects of Exogenous Fiscal Policy Shocks in Germany: A Disaggregated SVAR Analysis, Deutsche Bundesbank Discussion Paper, 41.

Monacelli, T. and Perotti, R. 2010, Fiscal policy, the Real Exchange Rate, and Traded Goods, Economic Journal, 120, 437-461.

Mounford, A., Uhlig, H., 2008, What are the Effects of Fiscal Policy Shocks?, NBER Working Paper Series, n. 14551.

Perotti, R., 2004, Estimating the Effects of Fiscal Policy in OECD Countries, CEPR Working Paper, n. 276.

Perotti, R., 2007, In Search of the Transmission Mechanism of Fiscal Policy, NBER Macroeconomic Manual, n. 22.