Loading...
Macroeconomic impacts of fiscal policy shocks in the UK: A DSGE analysis
Bhattarai, K. ; Trzeciakiewicz, Dawid
Bhattarai, K.
Trzeciakiewicz, Dawid
Publication Date
2017-02
End of Embargo
Supervisor
Keywords
Rights
Reproduced in accordance with the publisher's self-archiving policy. This manuscript version is made available under the CC-BY-NC-ND 4.0 license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Peer-Reviewed
Yes
Open Access status
openAccess
Accepted for publication
27/10/2016
Institution
Department
Awarded
Embargo end date
Collections
Additional title
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.
Version
Accepted manuscript
Citation
Bhattarai K and Trzeciakiewicz D (2017) Macroeconomic impacts of fiscal policy shocks in the UK: A DSGE analysis. Economic Modelling. 61: 321-338.
Link to publisher’s version
Link to published version
Link to Version of Record
Type
Article