Estimating government spending shocks in a VAR model

Picture of the front page of the publication
07-12-2021
MAKRO

In this working paper, the effects of and adjustment to government spending shocks for the Danish economy are estimated and identified in a structural VAR model using quarterly data.

Abstract

In this working paper, the effects of and adjustment to government spending shocks for the Danish economy are estimated and identified in a structural VAR model using quarterly data. The identification of government spending shocks cen-ters around the commonly used approach in Blanchard and Perotti [2002]. This is combined with an assumption of Denmark as a small open economy as well as sign restrictions to control for generic domestic shocks. This approach leads to re-sults, which are broadly in line with previous empirical findings, albeit they are asso-ciated with non-negligible uncertainty.