Time-varying Fiscal Multipliers Identified by Systematic Component: A Bayesian Approach to TVP-SVAR model

Iiboshi, Hirokuni and Iwata, Yasuharu and Kajita, Yuto and Soma, Naoto (2019): Time-varying Fiscal Multipliers Identified by Systematic Component: A Bayesian Approach to TVP-SVAR model.

Abstract

Abstract This study estimates time varying fiscal multipliers from the aspect of fiscal policy rules derived from the systematic component along the line of “Agnostic Identification Procedure” proposed by Caldara and Kamps (2017) for the US economy between 1952:Q1-2018:Q1. To do so, we adopt time-varying parameter structural vector autoregressive (TVP-SVAR) with MCMC procedure by a Bayesian approach, and identify both of government spending and tax cut shocks using the zero and sign restrictions method proposed by Arias, Rubio-Ramirez and Waggoner (2018). And we compare those values with time varying version identified by standard sign restriction along the line of Mountford and Uhlig (2009). Our estimation reports that time-varying fiscal multipliers of output by government spending rule could be nearly double for one year but decline to unity after eight years, and seem to have been very stable for long terms such as sixty years. By contrast, those of tax cut rule are more fluctuate and negative for long run except the 1990’s.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bayesian estimation, time-varying-parameter Structual VAR, Sign and Zero Restrictions
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy

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