Non-technical summary 1 Introduction 2 The data 3 The (S)VAR model 3.1 Specifi cation 3.2 Identifi cation strategy 3.3 Possible weaknesses of the SVAR approach to model fi scal policy shocks 4 The effects of government spending and tax shocks 4.1 Interpreting the fi scal shocks 4.2 The baseline VAR 4.3 Financial and fi scal stress and the impact of fi scal policy 4.4 Responses of private consumption and investment to fi scal shocks 4.5 The effects of different expenditure and net-tax components 4.6 Robustness checks 5 Conclusions Appendix References European Central Bank Working Paper Series CONTENTS 4 ECB Working Paper Series No 1133

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