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This paper uses a range of structural VARs to show that the response of US stock prices to fiscal shocks changed in 1980. Over the period 1955-1980 an expansionary spending or revenue shock was associated with modestly higher stock prices. After 1980, along with a decline in the fiscal...
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business cycle co-movements in response to news shocks. Second, we use VAR analysis to identify news shocks using data on four …
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