after a positive supply shock, whereas there is a non-significant response or a decline
following cyclical shocks, would suggest a larger role for productive public spending in
France instead. Evidence for Germany rather seems to indicate a too large size of
government. We find that revenues and spending go up permanently after cyclical shocks,
but positive supply shocks tend to be associated with reductions in spending.
Figure 5.3 Impulse Responses (response to a 1 standard deviation shock,
bootstrapped responses with 5000 draws)
France
response of Y to shock in Cyclical
0.60
0.40
0.20
-0.00
-0.20
-0.40
-0.60
-0.80
123456789 10
3.50
3.00 -
2.50 -
2.00 -
1.50 -
1.00 -
0.50 -
0.00
-0.50 -
-1.00 -
response of Y to shock in Supply
1 2 3 4 5 6 7 8 9 10
response of T to shock in Cyclical
1.25
1.00 -
0.75 -
0.50 -
0.25 -
0.00
1 2 3 4 5 6 7 8 9 10
137
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