Effects of fiscal policy on private consumption: Evidence from structural-balance fiscal rule deviations

Juan A. Correa, Christian Ferrada, Pablo Gutiérrez, Francisco Parro

Resultado de la investigación: Article

Resumen

We use a new narrative measure of fiscal shocks to study how private consumption reacts to government spending increases. Our fiscal shocks arise from three announcements of expansionary fiscal rule deviations in a small and open economy where fiscal policy follows a structural-balance fiscal rule. All those deviations were announced to be mainly on the spending side. We find a negative response of private consumption in the face of those announcements. Our findings are consistent with the existence of consumers expecting some irreversibility in government spending increases and, as a consequence, a rise in future taxes to make the newly announced fiscal spending path consistent with the intertemporal government budget constraint.

Idioma originalEnglish
Páginas (desde-hasta)776-781
Número de páginas6
PublicaciónApplied Economics Letters
Volumen21
N.º11
DOI
EstadoPublished - 1 ene 2014

Huella dactilar

Fiscal rules
Deviation
Government spending
Fiscal shocks
Announcement
Fiscal policy
Private consumption
Small economies
Government budget
Budget constraint
Tax
Fiscal
Irreversibility
Open economy

ASJC Scopus subject areas

  • Economics and Econometrics

Citar esto

Correa, Juan A. ; Ferrada, Christian ; Gutiérrez, Pablo ; Parro, Francisco. / Effects of fiscal policy on private consumption : Evidence from structural-balance fiscal rule deviations. En: Applied Economics Letters. 2014 ; Vol. 21, N.º 11. pp. 776-781.
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Effects of fiscal policy on private consumption : Evidence from structural-balance fiscal rule deviations. / Correa, Juan A.; Ferrada, Christian; Gutiérrez, Pablo; Parro, Francisco.

En: Applied Economics Letters, Vol. 21, N.º 11, 01.01.2014, p. 776-781.

Resultado de la investigación: Article

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