Fiscal developments and financial stress: a threshold VAR analysis
Result description
We use a threshold VAR analysis to study the linkages between changes in the debt ratio, economic activity and financial stress within different financial regimes. We use quarterly data for the US, the UK, Germany and Italy, for the period 1980:4-2014:1, encompassing macro, fiscal and financial variables, and use nonlinear impulse responses allowing for endogenous regime-switches in response to structural shocks. The results show that output reacts mostly positively to an increase in the debt ratio in both financial stress regimes; however, the differences in estimated multipliers across regimes are relatively small. Furthermore, a financial stress shock has a negative effect on output and worsens the fiscal situation. The large time-variation and the estimated nonlinear impulse responses suggest that the size of the fiscal multipliers was higher than average in the 2008-2009 crisis.
Keywords
The result's identifiers
Result code in IS VaVaI
Alternative codes found
RIV/67985556:_____/18:00488303
Result on the web
DOI - Digital Object Identifier
Alternative languages
Result language
angličtina
Original language name
Fiscal developments and financial stress: a threshold VAR analysis
Original language description
We use a threshold VAR analysis to study the linkages between changes in the debt ratio, economic activity and financial stress within different financial regimes. We use quarterly data for the US, the UK, Germany and Italy, for the period 1980:4-2014:1, encompassing macro, fiscal and financial variables, and use nonlinear impulse responses allowing for endogenous regime-switches in response to structural shocks. The results show that output reacts mostly positively to an increase in the debt ratio in both financial stress regimes; however, the differences in estimated multipliers across regimes are relatively small. Furthermore, a financial stress shock has a negative effect on output and worsens the fiscal situation. The large time-variation and the estimated nonlinear impulse responses suggest that the size of the fiscal multipliers was higher than average in the 2008-2009 crisis.
Czech name
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Czech description
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Classification
Type
Jimp - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
50201 - Economic Theory
Result continuities
Project
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)
Others
Publication year
2018
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Name of the periodical
Empirical Economics
ISSN
0377-7332
e-ISSN
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Volume of the periodical
54
Issue of the periodical within the volume
2
Country of publishing house
AT - AUSTRIA
Number of pages
29
Pages from-to
395-423
UT code for WoS article
000425952000004
EID of the result in the Scopus database
2-s2.0-85008220563
Basic information
Result type
Jimp - Article in a specialist periodical, which is included in the Web of Science database
OECD FORD
Economic Theory
Year of implementation
2018