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A Primer on the Empirical Identification of Government Spending Shocks (ICPSR 22681)
The empirical literature on the effects of government spending shocks lacks unanimity about the responses of consumption and wages. Proponents of shocks identified by structural vector autoregressions (VARs) find results consistent with New Keynesian models: consumption and wages increase. On the other hand, proponents of the narrative approach find results consistent with neoclassical models: consumption and wages decrease. This paper reviews these two identifications and confirms their differences by using standard economic series. It also uses alternative measures of government spending, output, and the labor market and shows that, although there are minor fluctuations within each identification, the disparate results between the two are robust to the alternative measures. However, under the structural VAR approach, the authors find some differences between the responses to federal and state/local government spending.
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Engemann, Kristie M., Michael T. Owyang, and Sarah Zubairy. A Primer on the Empirical Identification of Government Spending Shocks. ICPSR22681-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2008-06-09. http://doi.org/10.3886/ICPSR22681.v1
Persistent URL: https://doi.org/10.3886/ICPSR22681.v1
This study was funded by:
- Federal Reserve Bank of St. Louis. Research Division
Scope of Study
Subject Terms: consumption, economic activity, economic behavior, economic conditions, economic indicators, economic models, economic policy, economic trends, fiscal policy, government expenditures, government spending, households, labor markets, market economy, wages and salaries
Geographic Coverage: United States
(1) The zipped package contains a program file, a Microsoft Excel file which contains the documentation, data, and a data appendix used to create the figures and tables used in the publication. Additional documentation and syntax, also used to create the figures used in the publication, are contained within a second zipped package. (2) These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigators if further information is desired.
Original ICPSR Release: 2008-06-09
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