German and the rest of euro area fiscal policy during the crisis

Niklas Gadatsch, Klemens Hauzenberger and Nikolai Stähler

No 05/2015, Discussion Papers from Deutsche Bundesbank

Abstract: We present the estimated large-scale three-region DSGE model GEAR picturing Germany, the Euro Area and the Rest of the world. Compared to existing models of this type, GEAR incorporates a comprehensive fiscal block, involuntary unemployment and a complex international structure. We use the model to evaluate spillovers of fiscal policy, to calculate various present-value multipliers for distinct fiscal instruments, and to assess how discretionary fiscal policy in Germany and the Euro Area affected GDP growth during the global financial crisis. Our analysis suggests that spillovers of fiscal policy shocks in the Euro Area are small. Overall, spending multipliers are higher than revenue-based multipliers and are in line with those found in the literature. We find that, during the crisis, fiscal stimulus packages increased annualized quarter-on-quarter GDP growth substantially, both in Germany and in the rest of the Euro Area. The main drivers of GDP growth in Europe, however, were rest of the world and uncovered interest rate parity shocks, followed by domestic non-fiscal shocks.

Keywords: Fiscal Policy; Unemployment; DSGE modeling; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E32 E62 H2 J6 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dge, nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/110275/1/824598814.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:052015

Access Statistics for this paper

More papers in Discussion Papers from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().