Weekly Economics Seminar by Guido Ascari
March 3 @ 6:30 pm - 7:40 pm
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Title: Fiscal foresight and the effects of government spending: It’s all in the monetary-fiscal mix
Speaker:Guido Ascary, Professor, University of Oxford
Abstract: The effects of an announcement of future government spending changes on economic activity vary according to the monetary-fiscal regime in place. While once implemented, an increase in public expenditures is always expansionary, its announcement has opposite effects in the monetary regime, where it is contractionary, and in the fiscal regime, where it is expansionary. Anticipation effects can help in empirically distinguishing the two regimes. The data support this robust theoretical implication, reconciling conflicting results in the empirical literature, that disappear conditioning the estimates on the existing monetary-fiscal policy mix. Furthermore, these results suggest that it could be (un)wise to anticipate future fiscal policies, depending on the regime in place.