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The Macroeconomic Effects of Exogenous Fiscal Policy Shocks in Germany: A Disaggregated SVAR Analysis

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  • Tenhofen Jörn

    (University of Bonn, Institute of Econometrics and OR, Adenauerallee 24-42, 53113 Bonn, Germany)

  • Wolff Guntram B.

    (Deutsche Bundesbank, Wilhelm-Epstein-Str. 14, 60431 Frankfurt am Main, Germany)

  • Heppke-Falk Kirsten H.

    (Deutsche Bundesbank, Wilhelm-Epstein-Str. 14, 60431 Frankfurt am Main, Germany)

Abstract

We investigate the effects of fiscal policy shocks on the German economy extending the SVAR approach of Blanchard and Perotti (2002). Direct government expenditure shocks are found to increase output and private consumption on impact. The output multiplier is smaller than one and is falling rather quickly reaching zero after 3 years. Government operating expenditure has size able positive effects on output, in the long run in particular due to public capital formation. Compensation of public employees is not effective in stimulating the economy.Government net revenue shocks do not affect output significantly. Indirect taxes have little effects, while direct taxes lower output significantly. Overall, the effects of fiscal policy are short-lived with the exception of public investment increases.

Suggested Citation

  • Tenhofen Jörn & Wolff Guntram B. & Heppke-Falk Kirsten H., 2010. "The Macroeconomic Effects of Exogenous Fiscal Policy Shocks in Germany: A Disaggregated SVAR Analysis," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(3), pages 328-355, June.
    • Handle: RePEc:jns:jbstat:v:230:y:2010:i:3:p:328-355
    DOI: 10.1515/jbnst-2010-0305
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    More about this item

    Keywords

    Fiscal policy; government spending; net revenue; structural vector autoregression; Fiscal policy; government spending; net revenue; structural vector autoregression;
    All these keywords.

    JEL classification:

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

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