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The main aim of this study is to examine the effect of government spending and its components' shocks on the distribution of income between labour and capital in South Africa for the period between 1994Q2 and 2019Q3.

The effects of government spending shocks on income distribution are analysed using Jordà's (2005) local projection method. The shocks, however, are identified by applying short-run contemporaneous restrictions in a vector autoregressive model based on Cholesky identification scheme.

The results indicate that government spending shock has a positive and significant effect on labour share after the first quarter. This means that expansionary government spending has a paramount role in reducing income inequality in the economy. Both government investment and government consumption shocks have also contributed to a reduction in income inequality, though the magnitude effect is smaller for government consumption.

Research findings on the effects of government spending shock on income inequality are still inconclusive. Therefore, this research examines the effect of total government spending shock along with its components on labour income share for the South African economy.

The purpose of this paper is to test the effects of unanticipated fiscal policy shocks on the growth rate and the cyclical component of real private output and reveal different types of asymmetries in fiscal policy implementation.

The authors use two alternative vector autoregressive systems in order to construct the fiscal policy shocks: one with the simple sum monetary aggregate MZM and one with the alternative CFS Divisia MZM aggregate. From each one of these systems we extracted four types of shocks: a negative and a positive government spending shock and a negative and a positive government revenue shock. These eight different types of unanticipated fiscal shocks were used next to empirically examine their effects on the growth rate and cyclical component of real private GNP in two sets of regressions: one that assumes only contemporaneous effects of the shocks on output and one that is augmented with four lags of each fiscal shock.

The authors come up with three key findings: first, all fiscal multipliers are below unity but with signs as predicted by Keynesian theory. Second, government expenditures have a larger impact as compared to the tax policy and finally, positive government spending shocks are more significant than negative spending shocks. All these results are in line with previous studies and are robust through many tests using structural identification proposed by Blanchard and Perotti (2002).

The empirical findings in this manuscript can be used for conducting a more efficient fiscal policy. The importance of government spending shocks is empirically verified along with the asymmetries related to price stickiness predicted by Keynesian theory. According to the results an efficient fiscal policy would: in terms of an expansionary policy, use government spending as a means to stimulate the economy instead of tax cuts and in the case of a contractionary policy use government revenue (higher taxes) so that the costs of this policy in terms of output lost are lower.

In this study the authors introduce three main innovations: first, to the best of our knowledge the Divisia monetary aggregates have not yet been used to previous research pertaining to fiscal policy. Second, following Cover’s (1992) procedure of identifying monetary policy shocks we extract the unanticipated fiscal policy shocks on government spending and revenue. Finally, the authors explicitly test for the asymmetric effects on the growth rate and the cyclical component of real private GNP of a contractionary and expansionary fiscal policy.

Government spending has inconclusive effect on real exchange rate. From the very beginning neoclassical economists argued that a rise in government spending brings depreciation in real exchange rate while neo-Keynesians claimed that government spending appreciates real exchange rate. Hence, the main purpose of this paper is to examine the effect of government spending shock and its components' shocks, namely government consumption and government investment on real exchange rate over the period 2001Q1–2016Q1 for Ethiopia.

To examine the effects of government spending shocks on real exchange rate, Jordà's (2005) local projection method is employed in this study. The exogenous shocks, however, are identified recursively in a vector autoregressive model.

The impulse responses show that government spending shock leads to a statistically significant appreciation of real exchange rate in Ethiopia. This evidence supports the neo-Keynesian school of thought who predicts an appreciation of real exchange rate from a rise in government spending. While government investment shock depreciates real exchange rate on impact insignificantly, government consumption shock appreciates real exchange rate in this small open economy.

This research contributes to the scarce literature on the effect of fiscal policy shock on real exchange rate in small open economies like Ethiopia.

Using quarterly data for a sample of 17 industrial countries, the purpose of this paper is to study asymmetry in the face of monetary shocks compared to government spending shocks.

The paper outlines demand and supply channels determining the asymmetric effects of monetary and fiscal policies. The time‐series model is presented and an analysis of the difference in the asymmetric effects of monetary and fiscal shocks within countries is presented. There then follows an investigation of the relevance of demand and supply conditions to the asymmetric effects of monetary and fiscal shocks. The implications of asymmetry are contrasted across countries.

Fluctuations in real output growth, price inflation, wage inflation, and real wage growth vary with respect to anticipated and unanticipated shifts to the money supply, government spending, and the energy price. The asymmetric flexibility of prices appears a major factor in differentiating the expansionary and contractionary effects of fiscal and monetary shocks. Higher price inflation, relative to deflation, exacerbates output contraction, relative to expansion, in the face of monetary shocks. In contrast, larger price deflation, relative to inflation, moderates output contraction, relative to expansion in the face of government spending shocks. The growth of output and the real wage decreases, on average, in the face of monetary variability in many countries. Moreover, the growth of real output and the real wage increases, on average, in the face of government spending variability in many countries. Asymmetry differentiates the effects of monetary and government spending shocks within and across countries. The degree and direction of asymmetry provide a new dimension to differentiate between monetary and fiscal tools in the design of stabilization policies.

The paper's evidence sheds light on the validity of theoretical models explaining asymmetry in the effects of demand‐side stabilization policies. Moreover, the evidence should alert policy makers to the need to relax structural and institutional constraints to maximize the benefits of stabilization policies and minimize the adverse effects on economic variables.

Using data for a sample of advanced and developing countries, this paper aims to study the responses of monetary growth and the growth of government spending to external spillovers, namely, the growth of exports and imports, movement in the real effective exchange rate and the change in the oil price. The objective is to study movements in domestic policy variables in open economies that are vulnerable to trade and commodity price shocks.

The analysis evaluates correlations between the responses of the policy variables to external spillovers. Further, the analysis studies the effects of indicators of economic performance on domestic policy responses to various shifts across countries.

Higher variability of real and nominal growth increases the fiscal policy response to external spillovers with an aim to stem further variability. Monetary policies appear to be more responsive to trend price inflation with an aim to stem further inflationary pressures. Fiscal policy’s reaction to trend price inflation aims at striking a balance between countering potential inflationary pressures, as well as recessionary conditions attributed to the various spillovers.

Overall, the evidence points to the importance of trade and commodity price shifts to the design of domestic policies. Further indicators of economic performance differentiate the degree of policy responses to trade and commodity price developments with a goal to stem inflationary pressures and reduce aggregate uncertainty.

This study examines the asymmetric effect of government spending on economic growth in Nigeria over the period 1980–2017. Specifically, this study investigates whether the response of economic growth to government spending shocks differs according to the nature of shocks on them. In addition, the authors examine whether the stabilizing effects of fiscal policies are dependent on the state of the business cycle.

The study adopts the linear fiscal reaction function in addition to the nonlinear regression model of Hatemi-J (2011, 2012), Granger and Yoon (2002), which allows us to separate negative shocks from positive shocks to government spending. Similarly, the authors adopt the generalized method of moments (GMM) techniques of Hansen (1982) to account for simultaneity and endogeneity problems inherent in dynamic model.

The authors’ findings reveal that there is evidence of asymmetry in the government spending–economic growth nexus in Nigeria over the period of study. Specifically, the authors find that the response of economic growth to government spending shocks differs according to the nature of shocks on them. More specifically, the study established that the stabilizing effects of fiscal policies are dependent on the state of the business cycle.

Unlike the traditional method of modeling asymmetry, which adopts the simple inclusion of a squared government spending term or by the inclusion of a cubic government spending term, the model adopted in this study allows us to model shocks and show how the responses of economic growth to government expenditure differ according to the nature of shocks on them.

The purpose of this paper is to estimate the size of government spending components’ multipliers for the Ethiopian economy over the sample period of 2001Q1 up to 2017Q4.

The effects of government spending are analyzed by applying short-run contemporaneous restrictions for the identification of shocks in an SVAR in order to estimate multipliers for the small open economy. Accordingly, recursive identification scheme is used in this study.

From the impulse response functions, the authors found that aggregate government spending is less effective in stimulating the economy for the study period as evidenced by almost zero multipliers. This can be due to many structural and conjunctural factors that tend to lower the multiplier effects. At a disaggregate level, real GDP responds negatively to capital spending while its effect on recurrent spending is positive and insignificant on impact. The variation to real GDP is best explained by the variation in capital spending as compared to recurrent spending.

Though almost none in number, little research has been conducted in Ethiopia related to the effect of government spending shock on output. But this research deviates from the previous study by introducing a new methodology which is SVAR with cholesky decomposition. The previous study, however, used Bayesian VAR. Besides to that, using cholesky identification scheme, government spending is decomposed in to recurrent and capital spending to see the effect of government spending components on output and government spending multipliers are also computed both at an aggregate and disaggregate level.

The purpose of this paper is to show the asymmetric effects of government spending shocks for South Africa over the period 1960Q1–2014Q2.

A threshold vector autoregressive model that allows parameters to switch according to whether a threshold variable crosses an estimated threshold is employed to address the objective of this paper. The threshold value is determined endogenously using Hansen (1996) test. Generalized impulse responses introduced by Koop et al. (1996) are used to study the effects of government spending shocks on growth depending on their size, sign and timing with respect to the economic cycle. The author also uses a Cholesky decomposition identification scheme in order to identify discretionary government spending shocks in the non-linear model.

The empirical findings support the state-dependent effects of fiscal policy. In particular, the effects of 1 or 2 standard deviations expansionary or contractionary government spending shock on output are very small both on impact and in the long run; and a bit larger in downturns but has only a very limited effect or no effect in times of expansion. This result gives support to the evidence in the recent literature that fiscal policy in developing countries is overwhelmingly procyclical.

It adds to the scarce empirical fiscal literature of the South African economy in particular and developing economies in general by allowing non-linearities to estimate the effect of government spending shocks over economic cycle.

The purpose of this paper is to investigate whether the macroeconomic effects of government spending shocks vary with the degree of macroeconomic uncertainty.

The authors use quarterly US data from 1960 to 2017 and employ the Self-Exciting Interacted VAR (SEIVAR) to compute nonlinear generalized impulse response functions (GIRFs) to an orthogonalized government spending shock during tranquil and in uncertain times. The parsimonious design of the SEIVAR enables us to focus on extreme deciles of the uncertainty distribution and to control for the financing side of the government budget, monetary policy, financial frictions and consumer confidence.

Fiscal spending has positive output effects in tranquil times, but is contractionary during times of heightened macroeconomic uncertainty. The results indicate an important role of the endogenous response of macroeconomic uncertainty. Investigating different government spending purposes, only increases in research and development expenditures reduce uncertainty and boost output during uncertain times.

The authors contribute to the literature in using a method which allows to control for a large set of confounding factors and accounts for the uncertainty response.

The degree of development and the way to identify a fiscal shock matter in evaluating the effects of the fiscal policy. This paper contributes to the debate on the effects of a fiscal expansion on private consumption and the real effective exchange rate.

This paper uses a sign-restriction method to identify a fiscal shock in the panel structural VAR analysis in the context of both developed and developing countries.

The authors’ find that (1) private consumption increases in response to a positive government spending shock in both groups, yet such consumption effect is greater in developing than industrial countries; (2) the response of real effective exchange rate to the government spending shock varies across groups: it depreciates in developed countries and appreciates in developing countries; (3) trade balance improves in both groups.

This study sheds light on the differential effects of fiscal shock on consumption and real exchange rate in both developed and developing economies.