Testing the Effectiveness of Fiscal Policy on Output in France

In order to estimate the effectiveness of fiscal policy in France, we estimate a structural var inspired by Blanchard and Perotti [2002]. In accordance with most large macroeconometric models, the paper testifies to the macroeconomic effectiveness of a structural increase in public spending in the short run (multiplier close to 1.4) which, beyond its mechanical impact on aggregate demand, stimulates private consumption and investment. In the same way, the estimated effect of a structural increase in taxes on output is negative, mainly because of a decrease in private consumption; however, this response is small (multiplier close to — 0.1 only) and significant only in the very short run, even if this result depends on the specific tax under consideration.