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Download fileMacroeconomic impacts of fiscal policy shocks in the UK: A DSGE analysis
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posted on 2018-07-03, 09:33 authored by Keshab Bhattarai, Dawid TrzeciakiewiczDawid TrzeciakiewiczThis paper develops and estimates a new-Keynesian dynamic stochastic general equilibrium (DSGE) model for the analysis of fiscal policy in the UK. We find that government consumption and investment yield the highest GDP multipliers in the short-run, whereas capital income tax and public investment have dominating effect on GDP in the long-run. When nominal interest rate is at the zero lower bound, consumption taxes and public consumption and investment are found to be the most effective fiscal instruments throughout the analysed horizon, and capital and labour income taxes are established to be the least effective. The paper also shows that the effectiveness of fiscal policy decreases in a small open-economy scenario and that nominal rigidities improve effectiveness of public spending and consumption taxes, whereas decrease that of income taxes.
History
School
- Business and Economics
Department
- Economics
Published in
Economic ModellingVolume
61Pages
321 - 338Citation
BHATTARAI, K. and TRZECIAKIEWICZ, D., 2016. Macroeconomic impacts of fiscal policy shocks in the UK: A DSGE analysis. Economic Modelling, 61, pp.321-338.Publisher
© ElsevierVersion
- AM (Accepted Manuscript)
Publisher statement
This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/Publication date
2016Notes
This paper was published in the journal Economic Modelling and the definitive published version is available at https://doi.org/10.1016/j.econmod.2016.10.012.ISSN
0264-9993Publisher version
Language
- en