Let's get fiscal!
(2022) NEKP01 20221Department of Economics
- Abstract
- This thesis studies the effect on private consumption and its components by durability, following an exogenous shock to government spending, in Denmark and Sweden. In order to compare the outcomes when being at the zero lower bound (ZLB) or not, the quarterly data ranging from 1995 to 2020, is split into two sub-samples. The impulse response functions, generated by a Bayesian structural VAR (BSVAR), provides evidence towards a larger effect on private consumption in the new monetary policy regime for both countries. Conversely, the results from the higher interest rate environment suggests a crowding-out effect since consumption decreases on impact. Denmark displays a larger fiscal multiplier compared to Sweden when being in a higher... (More)
- This thesis studies the effect on private consumption and its components by durability, following an exogenous shock to government spending, in Denmark and Sweden. In order to compare the outcomes when being at the zero lower bound (ZLB) or not, the quarterly data ranging from 1995 to 2020, is split into two sub-samples. The impulse response functions, generated by a Bayesian structural VAR (BSVAR), provides evidence towards a larger effect on private consumption in the new monetary policy regime for both countries. Conversely, the results from the higher interest rate environment suggests a crowding-out effect since consumption decreases on impact. Denmark displays a larger fiscal multiplier compared to Sweden when being in a higher interest rate environment and vice versa in the lower interest rate environment. The varying magnitude, to some extent, derives from central banks responding differently to inflationary pressure from government spending, depending on the exchange rate policy. Durable goods drive the increased consumption in a zero lower bound environment, partly explained by facilitated credit expansions. It is evident from this thesis that the state of monetary policy is pivotal for the effect on private consumption from fiscal stimulus. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9084856
- author
- Grahn, David LU and Mammos, Stefania LU
- supervisor
- organization
- course
- NEKP01 20221
- year
- 2022
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Fiscal policy, zero lower bound, private consumption, durable goods, non-durable goods, government spending, BSVAR
- language
- English
- id
- 9084856
- date added to LUP
- 2022-10-10 11:27:51
- date last changed
- 2022-10-10 11:27:51
@misc{9084856,
abstract = {{This thesis studies the effect on private consumption and its components by durability, following an exogenous shock to government spending, in Denmark and Sweden. In order to compare the outcomes when being at the zero lower bound (ZLB) or not, the quarterly data ranging from 1995 to 2020, is split into two sub-samples. The impulse response functions, generated by a Bayesian structural VAR (BSVAR), provides evidence towards a larger effect on private consumption in the new monetary policy regime for both countries. Conversely, the results from the higher interest rate environment suggests a crowding-out effect since consumption decreases on impact. Denmark displays a larger fiscal multiplier compared to Sweden when being in a higher interest rate environment and vice versa in the lower interest rate environment. The varying magnitude, to some extent, derives from central banks responding differently to inflationary pressure from government spending, depending on the exchange rate policy. Durable goods drive the increased consumption in a zero lower bound environment, partly explained by facilitated credit expansions. It is evident from this thesis that the state of monetary policy is pivotal for the effect on private consumption from fiscal stimulus.}},
author = {{Grahn, David and Mammos, Stefania}},
language = {{eng}},
note = {{Student Paper}},
title = {{Let's get fiscal!}},
year = {{2022}},
}