Essays on Fiscal Policy
I study selected fiscal policy issues both in the short-run and long-run using empirical methods. In Chapter 2, I investigate the effects of increases in U.S. government expenditures on the private sector in a real business cycle framework using maximum likelihood. I distinguish between the consumption and the investment expenditure components of government purchases. This makes the model sufficiently flexible to admit crowding-in and crowding-out effects of the two government expenditures separately. I show that a 1% increase in government consumption increases output by 1.5%, while a 1% increase in government investment increases output by 0.0085%. In Chapter 3, I analyze the international transmission of shocks to public expenditures in a two-country business cycle model of saving and investment under perfect international capital mobility. I test the model for its ability to account for some puzzles identified in the international real business cycle literature, specifically the low cross-country consumption correlations, and the positive correlation between national saving and investment over time. I show that a model with technology and government spending shocks quantitatively explains the low consumption correlations across countries and the high investment-saving correlation. In Chapter 4, we develop a new index which provides early warning signals of fiscal sustainability problems for advanced and emerging economies. We use the index to assess the build-up of fiscal stress over time since the mid-1990s in advanced and emerging economies. We show that fiscal stress has increased recently to record-high levels in advanced countries, reflecting raising solvency risks and financing needs. In emerging economies, we show that risks are lower than in mature economies owing to sounder fiscal fundamentals, but fiscal stress remains higher than before the crisis.
Year of publication: |
2011-09-29
|
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Authors: | Mazraani, Samah |
Other Persons: | James Feigenbaum (contributor) ; Daniele Coen-Pirani (contributor) ; Marla Ripoll (contributor) ; David DeJong (contributor) |
Publisher: |
PIT |
Saved in:
freely available
Saved in favorites
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