What accounts for changes in US fiscal policy transmission?

F. BILBIIE, G. Mueller, A. Meier

Journal of Money, Credit, and Banking

octobre 2008, vol. 40, n°7, pp.1439-1470

Départements : Economie et Sciences de la décision

Using vector autoregressions on U.S. time series for 1957'79 and 1983'2004, we find government spending shocks to have stronger effects on output, consumption, and wages in the earlier period. We try to account for this observation within a DSGE model featuring price rigidities and limited asset market participation. Specifically, we estimate the structural parameters of the model for both periods by matching impulse responses. Model-based counterfactual experiments suggest that most of the changes in fiscal policy transmission are accounted for by increased asset market participation and the more active monetary policy of the Volcker'Greenspan period. asset market participationDSGEE21E62E63fiscal policygovernment spendingminimum distance estimationmonetary policyvector autoregression