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Fiscal policy in general equilibrium: empirical estimates from an error correction model

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  • Christian Weber

Abstract

Recent general equilibrium models of fiscal policy suggest that the government purchases multiplier can exceed unity and that the multiplier should be larger in the long run that in the short run. These results follow from dynamic supply-side interactions of labour and capital, and are in sharp contrast to the implications of earlier equilibrium models. A cointegrating regression and an error correction model are used to test these implications of the equilibrium model of fiscal policy empirically. Data for post-war USA provide strong empirical support for the equilibrium model.

Suggested Citation

  • Christian Weber, 1999. "Fiscal policy in general equilibrium: empirical estimates from an error correction model," Applied Economics, Taylor & Francis Journals, vol. 31(7), pages 907-913.
    • Handle: RePEc:taf:applec:v:31:y:1999:i:7:p:907-913
    DOI: 10.1080/000368499323878
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    Cited by:

    1. Sebastian Gechert, 2015. "What fiscal policy is most effective? A meta-regression analysis," Oxford Economic Papers, Oxford University Press, vol. 67(3), pages 553-580.
    2. Sebastian Gechert & Ansgar Rannenberg, 2014. "Are Fiscal Multipliers Regime-Dependent? A Meta Regression Analysis," IMK Working Paper 139-2014, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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