The effects of fiscal policy shocks: evidence from a Bayesian SVAR model with uncertain identifying assumptions
Abstract
Abstract We explore the effects of fiscal policy shocks on aggregate output and inflation. We use the Bayesian econometric methodology of Baumeister and Hamilton applied to the fiscal structural vector autoregressive model to evaluate key elasticities and fiscal multipliers using U.S. data. In our baseline specification that ends before Covid pandemic, the government spending multiplier is equal to approximately $0.57$ and tax multiplier is approximately $-0.35$ after one year. The short-term output elasticity of government spending is statistically insignificant and the output elasticity of taxes is approximately equal to $2.26$ .
Fields of Study & Subjects
Fiscal Policies and Political Economy
Monetary Policy and Economic Impact
Market Dynamics and Volatility
Publication details
- Journal / source
- Macroeconomic Dynamics
- Publisher
- Cambridge University Press (CUP)
- Volume
- 30
- Publication date
- 1 January 2026
- Language
- EN