Short-Run Effects of Fiscal Policy with Forward-Looking Financial Markets

Autor:	David Reifschneider, Douglas W. Elmendorf
Rok vydání:	2002
Předmět:	Macroeconomics Economics and Econometrics Stimulus (economics) Personal income Short run Accounting Forward looking Financial market Economics Monetary economics Finance Fiscal policy
Zdroj:	National Tax Journal. 55:357-386
ISSN:	1944-7477 0028-0283
DOI:	10.17310/ntj.2002.3.01
Popis:	We explore the short-run effects of fiscal policy using simulations of an empirical, rational-expectations, open-economy macromodel developed at the Federal Reserve Board. Based on this model, we find that tax cuts and spending increases generally stimu- late economic activity in the short run, contrary to the extreme view that forward-looking financial markets more than offset the direct expansionary impulse of those actions. However, the magni- tude of the stimulus is greatly attenuated by the financial-market feedback. For example, a sustained cut in personal income taxes raises output by less than the amount of the tax cut itself, and it likely reduces output (relative to baseline) in the first several years if phased in gradually over time. Our results also show that the estimated stimulus imparted by fiscal policy is sensitive to reason- able variation in the model's parameters.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::ac85bc662b9a0acb64fc4e396b96694a https://doi.org/10.17310/ntj.2002.3.01 Zobrazit plný text záznamu Plný text ve formátu PDF Plný text ve formátu HTML
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