Testing the Effectiveness of Fiscal Policy on Output in France: A SVAR Approach
Biau, Olivier
Testing the Effectiveness of Fiscal Policy on Output in France: A SVAR Approach - 2005.
84
To measure the effectiveness of fiscal policy in France, we estimate a structural VAR inspired by Blanchard and Perotti (2002). Consistently with most large macro-econometric models, our findings show the macroeconomic effectiveness of a structural increase in public spending in the short run (multiplier close to 1.4), which – beyond its mechanical impact on aggregate demand – stimulates private consumption and investment. Similarly, the estimated effect of a structural increase in taxes on output is negative, mainly because of a decrease in private consumption; however, this response is small (multiplier close to only-0.1) and significant only in the very short run, although the result depends on the specific tax examined.
Testing the Effectiveness of Fiscal Policy on Output in France: A SVAR Approach - 2005.
84
To measure the effectiveness of fiscal policy in France, we estimate a structural VAR inspired by Blanchard and Perotti (2002). Consistently with most large macro-econometric models, our findings show the macroeconomic effectiveness of a structural increase in public spending in the short run (multiplier close to 1.4), which – beyond its mechanical impact on aggregate demand – stimulates private consumption and investment. Similarly, the estimated effect of a structural increase in taxes on output is negative, mainly because of a decrease in private consumption; however, this response is small (multiplier close to only-0.1) and significant only in the very short run, although the result depends on the specific tax examined.
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