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The Effect of Fiscal Policy Shocks: A Study of Linear and Nonlinear Effects of Shocks to Fiscal Policy on Swedish Output, in a Local Projection-based Analysis
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2017 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

This paper investigates the linear and nonlinear effects of fiscal policy shocks on Swedish output. The structural shocks to government spending and net taxes are identified using triangular factorization in a Structural Vector Autoregressive Model and its Bayesian counterpart. The effects of the fiscal shocks are estimated as cumulative multipliers and are calculated using the Local Projection Methodology of Jordà (2005). Though much of the results lack statistical significance at conventional levels, a shock to government spending indicate nonlinear effects for the size and sign of the shock and both the gross government debt and the net public wealth. For net taxes, the nonlinearities are found for the state of the business cycle and the size and sign of the shock as well as the gross government debt. The linear estimations show that the effect of the shocks to government spending and net taxes follow a Keynesian pattern, with increased government spending associated with a positive effect on GDP and increased net taxes the opposite. The size of the multiplier for the tax shock is in line with previous research while the multiplier for spending is higher.

Place, publisher, year, edition, pages
2017.
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-326438OAI: oai:DiVA.org:uu-326438DiVA, id: diva2:1121183
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Available from: 2017-08-18 Created: 2017-07-10 Last updated: 2017-08-18Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
  • ieee
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More styles
Language
  • de-DE
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  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf