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Time-varying fiscal policy in the US

Author

Listed:
  • Pereira Manuel Coutinho

    (Banco de Portugal & CEMAPRE, Av. Almirante Reis, 71, Gab. 6.1.62, 1150-012 Lisboa, Portugal)

  • Lopes Artur Silva

    (CEMAPRE & ISEG, Univ. Tecn. Lisboa, Rua do Quelhas 6, Gab. 315, 1200 Lisboa, Portugal)

Abstract

To investigate time heterogeneity in the effects of fiscal policy in the US, we use a non-recursive, Blanchard and Perotti-like structural VAR with time-varying parameters, estimated through Bayesian simulation over 1965:2–2009:2. Our evidence suggests that fiscal policy has lost some capacity to stimulate output but this trend is more pronounced for taxes net of transfers than for government expenditure, whose effectiveness declines only slightly. Fiscal multipliers keep conventional signs throughout. An investigation of changes in fiscal policy conduct indicates an increase in the countercyclical responsiveness of net taxes over recent decades, which appears to have reached a maximum during the 2008–2009 recession.

Suggested Citation

  • Pereira Manuel Coutinho & Lopes Artur Silva, 2014. "Time-varying fiscal policy in the US," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 18(2), pages 157-184, April.
    • Handle: RePEc:bpj:sndecm:v:18:y:2014:i:2:p:28:n:2
    DOI: 10.1515/snde-2012-0062
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    References listed on IDEAS

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    More about this item

    Keywords

    Bayesian estimation; fiscal policy; structural change; macroeconomic stabilization;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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