Time-Varying Fiscal Policy In The U.S.
To investigate time heterogeneity in the effects of fiscal policy in the U.S., the authors use a non-recursive, Blanchard and Perotti-like structural VAR with time-varying parameters, estimated through Bayesian simulation over the 1965:22009:2 period. The evidence suggests that fiscal policy has lost some capacity to stimulate output but that this trend is more pronounced for taxes net of transfers than for government expenditure, whose effectiveness declines only slightly. Fiscal multipliers keep conventional signs throughout. An investigation of changes in fiscal policy conduct indicates an increase in the countercyclical activism of net taxes over time, which appears to have reached a maximum during the 2008-09 recessions.