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Title: Macroeconomic impacts of fiscal policy shocks in the UK: A DSGE analysis
Authors: Bhattarai, Keshab
Trzeciakiewicz, Dawid
Keywords: Fiscal policy
DSGE model
UK economy
Issue Date: 2016
Publisher: © Elsevier
Citation: BHATTARAI, K. and TRZECIAKIEWICZ, D., 2016. Macroeconomic impacts of fiscal policy shocks in the UK: A DSGE analysis. Economic Modelling, 61, pp.321-338.
Abstract: This 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.
Description: 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.
Version: Accepted for publication
DOI: 10.1016/j.econmod.2016.10.012
URI: https://dspace.lboro.ac.uk/2134/33683
Publisher Link: https://doi.org/10.1016/j.econmod.2016.10.012
ISSN: 0264-9993
Appears in Collections:Published Articles (Economics)

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