Modelling anticipated and temporary fiscal policy shocks in a macro-econometric model of Canada.

Following the work of Ray Fair (1979), expectations terms in the FOCUS model are generated using predicted values from the model itself. Expectations are therefore 'consistent' with the model structure. Government expenditure multipliers are compared for the standard model and the CE version. Three further examples show the power of the technique as applied to the analysis of fiscal policy shocks. The first considers a temporary versus a permanent income tax surcharge. The second considers the possibility of an 'anticipatory recession' when pre-announced fiscal stimulus is combined with monetary restraint. The third examines the planned re-structuring of the Canadian corporate tax system. [ABSTRACT FROM AUTHOR]