A comprehensive ad-hoc review of fiscal policy literature: vector autoregressive models from 1998 to 2021

Resumen

This literature review provides a comprehensive analysis of the fiscal policy literature from 1998 to 2021, focusing exclusively on studies employing vector autoregressive (VAR) models -including 69 papers covering 144 distinct models-. The review examines different identification methods employed in the VAR-based fiscal policy literature. It also explores the differences in data structure and covers 23 sample countries, and regions. A differentiated pattern is evident in the construction of models and their use in developed countries, primarily. Some models use a notable number of variables, reaching up to 14 as a maximum. Overall, this literature review provides an organized overview of the research frontier in fiscal policy research using VAR models, offering valuable insights for future research in this area. VAR models are useful in studying the effects of fiscal policy as they capture the dynamic interdependence between government spending, taxes, and other macroeconomic variables.