Effects of Fiscal Policy Shocks (Mountford and Uhlig)

Andrew Mountford and Harald Uhlig published “What are the effects of fiscal policy shocks?“, as NBER Working Paper n. 14551, December 2008. “We explicitly allow for the possibility of announcement effects, i.e., that a current fiscal policy shock changes fiscal policy variables in the future, but not at present… We find that deficit-financed tax cuts work best among these three scenarios to improve GDP, with a maximal present value multiplier of five dollars of total additional GDP per each dollar of the total cut in government revenue five year after the shock”. See: http://www.nber.org/papers/w14551