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Fiscal policy and national saving

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Abstract:

This paper uses structural vector autoregressions along with structural measures of fiscal policy to measure the dynamic impact of fiscal policy shocks on the output gap and national saving. Positive shocks to government purchases and negative shocks to real net taxes are found to increase the output gap. Positive shocks to the government's structural surplus increases national saving although the effects are small. Positive shocks to government purchases are found to substantially reduce national saving. Negative shocks to real net tax revenues as a share of potential GDP have a small negative impact on national saving.

Document Type: Research Article

DOI: https://doi.org/10.1080/00036840500109118

Affiliations: School of Business Administration, Loyola University Chicago, 820 North Michigan Avenue, Chicago IL 60611, USA, Email: mhayfor@luc.edu

Publication date: 2005-05-20

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