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Publication Detailed Description
Journal Title
Oxford Bulletin of Economics and Statistics
Year (definitive publication)
2014
Language
English
Country
United States of America
More Information
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Abstract
We quantify the impact of government spending shocks in the US. Thereby, we control for
fiscal foresight, a specific limited information problem (LIP) by utilizing the narrative
approach. Moreover, we surmount the generic LIP inherent in vector autoregressions
(VARs) by a factor-augmented VAR (FAVAR) approach. We find that a positive deficit-
financed defence shock raises output by more than in a VAR (e.g. 2.61 vs. 2.04 for peak
multipliers). Furthermore, our evidence suggests that consumption is crowded in. These
results are robust to variants of controlling for fiscal foresight and reveal the crucial role
of the LIP in fiscal VARs.
Acknowledgements
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Keywords
Fields of Science and Technology Classification
- Mathematics - Natural Sciences
- Economics and Business - Social Sciences
- Sociology - Social Sciences
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