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The Macroeconomic Effects Of Fiscal Policy. A Bvar Approach

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  • Ioana BOICIUC

    (Academy of Economic Studies, Bucharest, Romaniaa)

Abstract

The interest on fiscal policy has been recently renewed due to the economic recession and given the limited scope of monetary policy to provide additional stimulus for the economy. Also the empirical studies on fiscal policy have not reached a consensus about the effects of fiscal shocks on macroeconomic variables. This study seeks to analyze the effects of government expenditure and tax revenue shocks on economic activity by applying a BVAR methodology. The advantage of the Bayesian technique is that it allows prior information to be imposed on the system, in addition to that provided by data. This paper provides a detailed evaluation of the effects of fiscal policy in Romania, but also for the Eastern European Emerging Markets. Quarterly data for five variables are used in the estimation: GDP, inflation, interest rate, government expenditure and tax revenues. The main results show that the fiscal policy has a small effect on the considered variable.

Suggested Citation

  • Ioana BOICIUC, 2014. "The Macroeconomic Effects Of Fiscal Policy. A Bvar Approach," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 14, pages 163-169, December.
    • Handle: RePEc:aic:revebs:y:2014:d:14:boiciuci
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    References listed on IDEAS

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    1. Andrew Mountford & Harald Uhlig, 2009. "What are the effects of fiscal policy shocks?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 960-992.
    2. Ant Afonso & Ricardo M. Sousa, 2012. "The macroeconomic effects of fiscal policy," Applied Economics, Taylor & Francis Journals, vol. 44(34), pages 4439-4454, December.
    3. Michal Franta, 2012. "Macroeconomic Effects of Fiscal Policy in the Czech Republic: Evidence Based on Various Identification Approaches in a VAR Framework," Working Papers 2012/13, Czech National Bank.
    4. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
    5. António Afonso & Ricardo Sousa, 2011. "The macroeconomic effects of fiscal policy in Portugal: a Bayesian SVAR analysis," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(1), pages 61-82, April.
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    Cited by:

    1. Ianc, Nicolae-Bogdan & Turcu, Camelia, 2020. "So alike, yet so different: Comparing fiscal multipliers across EU members and candidates," Economic Modelling, Elsevier, vol. 93(C), pages 278-298.
    2. Mirdala, Rajmund & Kameník, Martin, 2017. "Effects of Fiscal Policy Shocks in CE3 Countries (TVAR Approach)," MPRA Paper 79918, University Library of Munich, Germany.
    3. Nicolae-Bogdan Ianc & Camelia Turcu, 2019. "So alike, yet so different: comparing fiscal multipliers across E(M)U candidates," Working Papers 2019.03, International Network for Economic Research - INFER.

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    More about this item

    Keywords

    Fiscal Policy; Bayesian estimation; VAR model;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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