The effects of discretionary fiscal policy on macroeconomic aggregates

Gaber, Stevan and Gruevski, Ilija and Gaber, Vasilka (2013) The effects of discretionary fiscal policy on macroeconomic aggregates. BEH - Business and Economic Horizons, 9 (1). pp. 33-40. ISSN 1804-5006

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Abstract

The evidence on the practice and effects of discretionary fiscal policy, particularly in
the context of recent efforts to stimulate the economy, is reviewed where two main
conclusions are drawn. First, policy interventions have increased in this decade predating
the 2009 stimulus. Second, despite huge economic literature on the topic, the
state of theory and evidence is not as "shovel ready" as one would like. Although
consumption and investment clearly respond to tax incentives and structural vector
auto-regressions show that lower taxes and higher government purchases can boost
output, it is difficult to apply the findings in the current context, in part because
multipliers and policy lags are likely to vary with economic conditions. This paper
considers theoretical predictions and recent empirical Vector Autoregression (VAR)
evidence on the short-run effects of discretionary fiscal policy on macroeconomic
aggregates.

Item Type: Article
Uncontrolled Keywords: Macroeconomic models, VAR, fiscal policy, macroeconomic aggregates, real business cycles theory
Subjects: Social Sciences > Economics and business
Divisions: Faculty of Economics
Depositing User: Stevan Gaber
Date Deposited: 25 Sep 2013 12:56
Last Modified: 25 Sep 2013 12:56
URI: https://eprints.ugd.edu.mk/id/eprint/7557

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