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THE EFFECTS OF FISCAL POLICY SHOCKS IN SVAR MODELS: A GRAPHICAL MODELLING APPROACH
Author(s) -
Fragetta Matteo,
Melina Giovanni
Publication year - 2011
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.1467-9485.2011.00558.x
Subject(s) - economics , business cycle , econometrics , fiscal policy , a priori and a posteriori , stability (learning theory) , identification (biology) , sample (material) , macroeconomics , keynesian economics , computer science , thermodynamics , philosophy , botany , physics , epistemology , machine learning , biology
We apply graphical modelling (GM) theory to identify fiscal policy shocks in SVAR models of the US economy. Unlike other econometric approaches – which achieve identification by relying on potentially contentious a priori assumptions – GM is a data based tool. Our results are in line with Keynesian theoretical models, being also quantitatively similar to those obtained in the recent SVAR literature à la Blanchard and Perotti (2002), and contrast with neoclassical real business cycle predictions. Stability checks confirm that our findings are not driven by sample selection.