Fiscal Policy Shocks In The Euro Area And The US: An Empirical Assessment

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Executive Summary

The authors analyse the impact of fiscal policy shocks in the euro area as a whole, using a newly available quarterly dataset of fiscal variables for the period 1981-2007. To allow for comparability with previous results on euro area countries and the US, they use a standard structural VAR framework, and study the impact of aggregated and disaggregated government spending and net taxes shocks. In addition, to frame euro area results, they apply the same methodology for the same sample period to US data. They also explore the sensitivity of the provided results to the inclusion of variables aiming at measuring "Financial stress" (increases in risk) and "Fiscal stress" (sustainability concerns).

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