Confidence And The Transmission Of Government Spending Shocks

There seems to be a widespread belief among economists, policy-makers, and members of the media that the "Confidence" of households and businesses is a critical component in the transmission of fiscal policy shocks into economic activity. The authors take this proposition to the data using standard structural VARs with government spending and aggregate output augmented to include empirical measures of consumer or business confidence. They also estimate non-linear VAR specifications to allow for differential impacts of government spending in "Normal" times versus recessions.

Provided by: National Bureau of Economic Research Topic: Project Management Date Added: May 2011 Format: PDF

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