Replication data for: Fiscal Volatility Shocks and Economic Activity

Principal Investigator(s): View help for Principal Investigator(s) Jesús Fernández-Villaverde; Pablo Guerrón-Quintana; Keith Kuester; Juan Rubio-Ramírez

Version: View help for Version V1

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Project Citation:

Fernández-Villaverde, Jesús, Guerrón-Quintana, Pablo, Kuester, Keith, and Rubio-Ramírez, Juan. Replication data for: Fiscal Volatility Shocks and Economic Activity. Nashville, TN: American Economic Association [publisher], 2015. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-11. https://doi.org/10.3886/E112890V1

Project Description

Summary: We study how unexpected changes in uncertainty about fiscal policy affect economic activity. First, we estimate tax and spending processes for the United States with time-varying volatility to uncover evidence of time-varying volatility. Second, we estimate a VAR for the US economy using the time-varying volatility found in the previous step. Third, we feed the tax and spending processes into an otherwise standard New Keynesian model. Both in the VAR and in the model, we find that unexpected changes in fiscal volatility shocks can have a sizable adverse effect on economic activity. An endogenous increase in markups is a key mechanism. (JEL E12, E23, E32, E52, E62)

Scope of Project

JEL Classification:
      E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
      E23 Macroeconomics: Production
      E32 Business Fluctuations; Cycles
      E52 Monetary Policy
      E62 Fiscal Policy

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V1 [2019-10-11]

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