Public Debt, Global Governance and Economic Dynamism by Luigi Paganetto

Author:Luigi Paganetto
Language: eng
Format: epub
Publisher: Springer Milan, Milano

4 The Effects of Government Consumption Shocks

Figure 1 shows the response of the fiscal and macroeconomic variables to an exogenous shock (equal to 1 % of private GDP) to government consumption. In each panel the solid line represents the median response, while the dashed lines represent two sets of lower and upper bands, corresponding to the 5, 16, 84 and 95th percentiles of the distribution of the responses at each horizon, as commonly done in the literature.10

Fig. 1Impulse responses to a positive government consumption shock equal to 1 % of private GDP (SVAR model). The curves represent the median and two sets of lower and upper bands, corresponding to the 5, 16, 84 and 95th percentiles of the distribution. Responses, except for inflation and interest rate, are deviations from the baseline and expressed in percentage points of private GDP. Inflation and interest rate responses are deviations from the baseline and expressed in percentage points

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