TY  - JOUR
AU  - Blanchard,Olivier
AU  - Perotti,Roberto
TI  - An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7269
PY  - 1999
Y2  - July 1999
UR  - http://www.nber.org/papers/w7269
L1  - http://www.nber.org/papers/w7269.pdf
N1  - Author contact info:
Olivier J. Blanchard
International Monetary Fund
Economic Counsellor and Director
Research Department
700 19th Street, NW
Rm. 10-700
Washington DC, 20431
Tel: 202-623-7825
Fax: 202-623-7271
E-Mail: blanchar@mit.edu

Roberto Perotti
IGIER Universita' Bocconi
Via Roentgen 1
20136 Milano
ITALY
Tel: 39 02 58363073
Fax: 39 02 58363302
E-Mail: roberto.perotti@unibocconi.it
AB  - This paper characterizes the dynamic effects of shocks in government spending and taxes on economic activity in the United States in the post-war period.  It does so by using a mixed structural VAR/event study approach.  Identification is achieved by using institutional information about the tax and transfer systems and the timing of tax collections to identify the automatic response of taxes and spending to activity, and, by implication, to infer fiscal shocks. The results consistently show positive government spending shocks as having a positive effect on output, and positive tax shocks as having a negative effect.  The multipliers for both spending and tax shocks are typically small.  Turning to the effects of taxes and spending on the components of GDP, one of the results has a distinctly non-standard flavor: Both increases in taxes and increases in government spending have a strong negative effect on investment spending.
ER  -