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Fiscal multipliers and the level of economic activity: a structural threshold VAR model for the UK

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posted on 2019-11-06, 14:25 authored by Rozina Shaheen, Paul Turner
This article examines the impact of fiscal policy shocks in the UK economy using a nonlinear structural threshold vector autoregression (TVAR) model which links Gross Domestic Product (GDP), government expenditure and tax receipts. The model is structural in the sense that the contemporaneous linkages between the variables are determined by economic theory and by our assumptions about the institutional structure of the tax and transfer system. This structure is also influenced by the state of the economy as measured by the deviation of GDP from the Hodrick-Prescott trend. We find that the state of the economy is important, with fiscal policy having very different multiplier effects during ‘boom’ periods relative to ‘normal’ periods. However, we find low values for the government expenditure multiplier in all regimes.

History

School

  • Business and Economics

Department

  • Economics

Published in

Applied Economics

Volume

52

Issue

17

Pages

1857-1865

Publisher

Taylor and Francis

Version

  • AM (Accepted Manuscript)

Rights holder

© Informa UK Limited, trading as Taylor & Francis Group

Publisher statement

This is an Accepted Manuscript of an article published by Taylor & Francis in Applied Economics on 28 October 2019, available online: http://www.tandfonline.com/10.1080/00036846.2019.1679347.

Acceptance date

2019-10-09

Publication date

2019-10-28

Copyright date

2020

ISSN

0003-6846

eISSN

1466-4283

Language

  • en

Depositor

Prof Paul Turner. Deposit date: 6 November 2019

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