Proceedings of World Business Research Conference
21 - 23 April 2014, Novotel World Trade Centre, Dubai, UAE, ISBN: 978-1-922069-48-1
Effects of Fiscal Policy in the Goods Market, Evidence in
Selected European Countries
Abdoul Wane and Jehad Yasin
Using a set of cointegration and error correction models with Threshold
Autoregressive (TAR) or Momentum Threshold Autoregressive (MTAR)
asymmetric adjustment, we investigate whether the effects of fiscal policy (i.e.
expansionary or contractionary government spending shocks) on the goods
market in some selected European countries (France, Germany, Italy and the
United Kingdom) are asymmetric or not. Forty five years of quarterly series on
output, tax revenues, government expenditures, and price of oil for the selected
European countries obtained from the International Monetary Fund’s
International Financial Statistics CD-ROM were used for the different tests.
Empirical results show that the effects of fiscal policy on the goods market are
asymmetric in all countries except in France. Furthermore, the impulse
response functions indicate that the results are consistent with a dynamic
asymmetry in the behavior of fiscal policy movements in all countries except in
France.
JEL Classification Codes: C22, E6, E24.
Keywords: Cointegration, Asymmetric adjustment, monetary policy, Threshold
Autoregressive model, Momentum Threshold Autoregressive model.
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Dr. Abdoul Wane, Department of Management, School of Business and Economics, Building 1,
Australian College of Kuwait (ACK, KUWAIT), West Mishref, Block 5, Al Aqsa Mosque Street,
Tel :+(965) 1828225, Ext.: 4247, Fax: +(965) 25376222, Email: a.wane@ack.edu.kw
Dr. Jehad Yasin, Department of Management, School of Business and Economics, Building 1,
Australian College of Kuwait (ACK, KUWAIT), West Mishref, Block 5, Al Aqsa Mosque Street,
Tel :+(965) 1828225, Ext.: 4160, Fax: +(965) 25376222, Email: j.yasin@ack.edu.kw