CXO

Fiscal Policy In The BRICS

Download Now Date Added: Jun 2011
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This paper assesses the macroeconomic impact of fiscal policy shocks for four key emerging market economies - Brazil, Russia, India and China (BRICs) - using a Bayesian Structural Vector Auto-Regressive (BSVAR) approach, a Sign-Restrictions Vector Auto-Regressive framework and a Panel Vector Auto-Regressive (PVAR) model. To get a deeper understanding of the government's behaviour, the authors also estimate fiscal policy rules using a Fully Simultaneous System of Equations and analyze the importance of nonlinearity using a smooth transition (STAR) model. Drawing on quarterly frequency data, they find that government spending shocks have strong Keynesian effects for this group of countries while, in the case of government revenue shocks, a tax hike is harmful for output.