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Title: Fiscal foresight, limited information and the effects of government spending shocks
Authors: Fragetta, M.
Gasteiger, E.
Issue Date: 2014
Publisher: Wiley-Blackwell
Abstract: We quantify the impact of government spending shocks in the US. Thereby, we control for fiscal foresight, a specific limited information problem (LIP) by utilizing the narrative approach. Moreover, we surmount the generic LIP inherent in vector autoregressions (VARs) by a factor-augmented VAR (FAVAR) approach. We find that a positive deficit- financed defence shock raises output by more than in a VAR (e.g. 2.61 vs. 2.04 for peak multipliers). Furthermore, our evidence suggests that consumption is crowded in. These results are robust to variants of controlling for fiscal foresight and reveal the crucial role of the LIP in fiscal VARs.
Description: WOS:000341244200003 (Nº de Acesso Web of Science)
Peer reviewed: Sim
ISSN: 0305-9049
Publisher version: The definitive version is available at:
Appears in Collections:BRU-RI - Artigos em revistas científicas internacionais com arbitragem científica

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