Measuring the Impact of Fiscal Policy in the Face of Anticipation: A Structural VAR Approach

Morten Ravn and Karel Mertens

No 7423, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Empirical estimates of the impact of government spending shocks disagree on central issues such as the size of output multipliers and the responses of consumption and the real wage. One explanation for the disagreement is that fiscal shocks are often anticipated. Due to misspecification of the information set, anticipation effects may invalidate SVAR estimates of impulse responses. We use economic theory to derive a fiscal SVAR estimator that is applicable when fiscal shocks are anticipated. We study its properties and apply it to US data. We fail to find evidence that anticipation effects overturn the existing findings from the fiscal SVAR literature.

Keywords: Anticipation effects; Fiscal policy; Structural vector autoregressions (search for similar items in EconPapers)
JEL-codes: C32 E20 E32 E62 (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-cba
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Citations: View citations in EconPapers (43)

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Journal Article: Measuring the Impact of Fiscal Policy in the Face of Anticipation: A Structural VAR Approach (2010)
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