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Fiscal policy and credit spreads: Evidence from a SVAR
Journal article   Peer reviewed

Fiscal policy and credit spreads: Evidence from a SVAR

Maria Pia Olivero
Economics bulletin, v 39(2), p1393
01 Jan 2019

Abstract

Business & Economics Economics Social Sciences
We study the interaction between fiscal policy, economic activity and credit market conditions using a structural VAR approach similar to that in Blanchard and Perotti (2002). We show that failing to account for the endogenous response of credit spreads to fiscal policy shocks results in the real effects of these shocks being underestimated. We see our results as indicating the presence of a not yet well understood "credit channel of fiscal policy transmission".

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