JabRef Research Papers

JabRef references

Author	Title	Year	Journal/Proceedings	Reftype	DOI/URL
Acconcia, A., Corsetti, G. and Simonelli, S.	Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment [Abstract] [BibTeX]	2014	American Economic Review Vol. 104(7), pp. 2185-2209	article	URL
Abstract: A law issued to combat political corruption and Mafia infiltration of city councils in Italy has resulted in episodes of large, unanticipated, temporary contractions in local public spending. Using these episodes as instruments, we estimate the output multiplier of spending cuts at provincial level - controlling for national monetary and fiscal policy, and holding the tax burden of local residents constant - to be 1.5. Assuming that lagged spending is exogenous to current output brings the estimate of the overall multiplier up to 1.9. These results suggest that local spending adjustment may be quite consequential for local activity.
BibTeX: @article{Acconcia2014, author = {Antonio Acconcia and Giancarlo Corsetti and Saverio Simonelli}, title = {Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment}, journal = {American Economic Review}, year = {2014}, volume = {104}, number = {7}, pages = {2185-2209}, note = {Please note that an earlier version was published as the 281 Working Paper for the Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.104.7.2185} }
Agnello, L. and Cimadomo, J.	Discretionary Fiscal Policies over the Cycle: New Evidence Based on the ESCB Disaggregated Approach [Abstract] [BibTeX]	2012	International Journal of Central Banking Vol. 8(2), pp. 43-85	article	URL
Abstract: This paper explores how discretionary fiscal policies on the revenue side of the government budget have reacted to economic fluctuations in European Union countries. For this purpose, it uses data on legislated revenue changes and structural indicators provided twice per year by national central banks of European Union countries in the ESCB framework for analyzing fiscal policy. Results suggest that, overall, legislated changes in taxes and social security contributions have responded in a strongly procyclical way to the business cycle, while commonly used cyclical-adjustment methods point to acyclicality.
BibTeX: @article{Agnello2012, author = {Luca Agnello and Jacopo Cimadomo}, title = {Discretionary Fiscal Policies over the Cycle: New Evidence Based on the ESCB Disaggregated Approach}, journal = {International Journal of Central Banking}, year = {2012}, volume = {8}, number = {2}, pages = {43-85}, url = {http://www.ijcb.org/journal/ijcb12q2a2.pdf} }
Alberola, E., Mínguez, J.M.G., de Cos, P.H. and Marqués, J.M.	How cyclical do cyclically-adjusted balances remain? An EU study [Abstract] [BibTeX]	2003	Hacienda Pública Española Vol. 166(3), pp. 151-181	article	URL
Abstract: Observed budget balances are an imperfect indicator of the fiscal policy stance, because fluctuations in economic activity induce automatic changes in the balance, hence the use of cyclically-adjusted balances (CAB). However, this paper shows that CABs (as measured through one of the two methods currently used by the Commission) tend to be systematically overestimated during downturns and underestimated during expansions. The dominant source of this distortion arises from the filtering of revenues deemed to be cyclical, possibly signalling a problem with the computation of elasticities. The effect of the items which are assumed not to move with the cycle is non significant, but this overall result conceals offseting effects: public investment turns to be significantly procyclical and interest payments and transfers to firms are countercyclical. Classification-JEL : H6, E6.
BibTeX: @article{Alberola2003, author = {Enrique Alberola and José M. González Mínguez and Pablo Hernández de Cos and José M. Marqués}, title = {How cyclical do cyclically-adjusted balances remain? An EU study}, journal = {Hacienda Pública Española}, year = {2003}, volume = {166}, number = {3}, pages = {151-181}, url = {http://www.ief.es/documentos/recursos/publicaciones/revistas/hac_pub/166_Alberola.pdf} }
Alesina, A., Ardagna, S., Perotti, R. and Schiantarelli, F.	Fiscal Policy, Profits, and Investment [Abstract] [BibTeX]	2002	American Economic Review Vol. 92(3), pp. 571-589	article	URL
Abstract: This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. We find a sizeable negative effect of public spendings and in particular of its wage components on profits and on business investment. This result is consistent with different theoretical models in which government employment creates wage pressure for the private sector. Various types of taxes also have negative effects on profits, but, interestingly, the effects of government spending on investment are larger than those of taxes. Our results can explain the so-called "non-Keynesian" (i.e., expansionary) effects of fiscal adjustments. (JEL E22, E62)
BibTeX: @article{Alesina2002, author = {Alberto Alesina and Silvia Ardagna and Roberto Perotti and Fabio Schiantarelli}, title = {Fiscal Policy, Profits, and Investment}, journal = {American Economic Review}, year = {2002}, volume = {92}, number = {3}, pages = {571-589}, url = {https://www.aeaweb.org/articles?id=10.1257/00028280260136255} }
Alesina, A., Barbiero, O., Favero, C., Giavazzi, F. and Paradisi, M.	Austerity in 2009-13 [Abstract] [BibTeX]	2015	Economic Policy Vol. 30(83), pp. 383-437	article	URL
Abstract: The conventional wisdom is (i) that fiscal austerity was the main culprit for the recessions experienced by many countries, especially in Europe, since 2010 and (ii) that this round of fiscal consolidation was much more costly than past ones. The contribution of this paper is a clarification of the first point and, if not a clear rejection, at least it raises doubts on the second. In order to obtain these results we construct a new detailed "narrative" dataset which documents the size and composition of the fiscal plans implemented by several countries over 2009-13. Out of sample simulations, that project output growth conditional only upon the fiscal plans implemented since 2009, do reasonably well in predicting the total output fluctuations of the countries in our sample over the years 2010-13 and are also capable of explaining some of the cross-country heterogeneity in this variable. Fiscal adjustments based on cuts in spending appear to have been much less costly, in terms of output losses, than those based on tax increases. Our results, however, are mute on the question whether the countries we study did the right thing implementing fiscal austerity at the time they did, that is 2009-13.
BibTeX: @article{Alesina2015, author = {Alberto Alesina and Omar Barbiero and Carlo Favero and Francesco Giavazzi and Matteo Paradisi}, title = {Austerity in 2009-13}, journal = {Economic Policy}, year = {2015}, volume = {30}, number = {83}, pages = {383-437}, url = {http://economicpolicy.oxfordjournals.org/content/30/83/383} }
Alesina, A., Favero, C. and Giavazzi, F.	The output effect of fiscal consolidation plans [Abstract] [BibTeX]	2015	Journal of International Economics Vol. 96(S1), pp. S19-S42	article	URL
Abstract: We show that the correct experiment to evaluate the effects of a fiscal adjustment is the simulation of a multi-year fiscal plan rather than of individual fiscal shocks. Simulation of fiscal plans adopted by 16 OECD countries over a 30-year period supports the hypothesis that the effects of consolidations depend on their design. Fiscal adjustments based upon spending cuts are much less costly, in terms of output losses, than tax-based ones and have especially low output costs when they consist of permanent rather than stop-and-go changes in taxes and spending. The difference between tax-based and spending-based adjustments appears not to be explained by accompanying policies, including monetary policy. It is mainly due to the different responses of business confidence and private investment.
BibTeX: @article{Alesina2015a, author = {Alesina, Alberto and Favero, Carlo and Giavazzi, Francesco}, title = {The output effect of fiscal consolidation plans}, journal = {Journal of International Economics}, year = {2015}, volume = {96}, number = {S1}, pages = {S19-S42}, url = {http://www.sciencedirect.com/science/article/pii/S0022199614001238} }
Ardagna, S.	Fiscal Policy Composition, Public Debt, and Economic Activity [Abstract] [BibTeX]	2001	Public Choice Vol. 109(3-4), pp. 301-25	article	URL
Abstract: This paper uses a dynamic general equilibrium model i) to investigate how changes to different spending and revenue items of the budget affect economic activity and public finance; and ii) to evaluate the welfare costs of alternative fiscal policy maneuvers. The paper shows that, unlike an increase in government purchases of final goods, an increase in public employment and transfers can have a contractionary effect on the economy in the same way as a rise in tax rates. It also suggests that fiscal adjustments implemented by cutting spending items increase households' welfare and are more effective in reducing the primary deficit and public debt than are increases in tax rates.
BibTeX: @article{Ardagna2001, author = {Ardagna, Silvia}, title = {Fiscal Policy Composition, Public Debt, and Economic Activity}, journal = {Public Choice}, year = {2001}, volume = {109}, number = {3-4}, pages = {301-25}, url = {http://journals.kluweronline.com/issn/0048-5829/contents} }
Ardagna, S.	Fiscal stabilizations: When do they work and why [Abstract] [BibTeX]	2004	European Economic Review Vol. 48(5), pp. 1047-1074	article	URL
Abstract: No abstract is available for this item.
BibTeX: @article{Ardagna2004, author = {Ardagna, Silvia}, title = {Fiscal stabilizations: When do they work and why}, journal = {European Economic Review}, year = {2004}, volume = {48}, number = {5}, pages = {1047-1074}, url = {http://www.sciencedirect.com/science/article/pii/S0014-2921(03)00155-7} }
Ardagna, S., Caselli, F. and Lane, T.	Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries [Abstract] [BibTeX]	2007	The B.E. Journal of Macroeconomics Vol. 7(1), pp. 1-35	article	URL
Abstract: We use a panel of 16 OECD countries over several decades to investigate the effects of government debts and deficits on long-term interest rates. In simple static specifications, a one-percentage-point increase in the primary deficit relative to GDP increases contemporaneous long-term interest rates by about 10 basis points. In a vector autoregression (VAR), the same shock leads to a cumulative increase of almost 150 basis points after 10 years. The effect of debt on interest rates is non-linear: only for countries with above-average levels of debt does an increase in debt affect the interest rate. World fiscal policy is also important: an increase in total OECD-government borrowing increases each country's interest rates. However, domestic fiscal policy continues to affect domestic interest rates even after controlling for worldwide debts and deficits.
BibTeX: @article{Ardagna2007, author = {Ardagna, Silvia and Caselli, Francesco and Lane, Timothy}, title = {Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries}, journal = {The B.E. Journal of Macroeconomics}, year = {2007}, volume = {7}, number = {1}, pages = {1-35}, url = {http://www.degruyter.com/view/j/bejm.2007.7.1/bejm.2007.7.1.1417/bejm.2007.7.1.1417.xml?format=INT} }
Ardagna, S.	Financial markets' behavior around episodes of large changes in the fiscal stance [Abstract] [BibTeX]	2009	European Economic Review Vol. 53(1), pp. 37-55	article	URL
Abstract: Using a panel of OECD countries from 1960 to 2002, this paper shows that interest rates, particularly those of long-term government bonds, decrease when countries' fiscal position improves and increase around periods of budget deteriorations. Stock market prices surge around times of substantial fiscal tightening and plunge in periods of very loose fiscal policy. In addition, the paper shows that results depend on countries' initial fiscal conditions and on the type of fiscal consolidations: Fiscal adjustments that occur in country-years with high levels of government deficit, that are implemented by cutting government spending, and that generate a permanent and substantial decrease in government debt are associated with larger reductions in interest rates and increases in stock market prices.
BibTeX: @article{Ardagna2009, author = {Ardagna, Silvia}, title = {Financial markets' behavior around episodes of large changes in the fiscal stance}, journal = {European Economic Review}, year = {2009}, volume = {53}, number = {1}, pages = {37-55}, url = {http://www.sciencedirect.com/science/article/pii/S0014-2921(08)00069-X} }
Auerbach, A.J. and Gorodnichenko, Y.	Measuring the Output Responses to Fiscal Policy [Abstract] [BibTeX]	2012	American Economic Journal: Economic Policy Vol. 4(2), pp. 1-27	article	URL
Abstract: A key issue in current research and policy is the size of fiscal multipliers when the economy is in recession. We provide three insights. First, using regime-switching models, we find large differences in the size of spending multipliers in recessions and expansions with fiscal policy being considerably more effective in recessions than in expansions. Second, we estimate multipliers for more disaggregate spending variables which behave differently relative to aggregate fiscal policy shocks, with military spending having the largest multiplier. Third, we show that controlling for predictable components of fiscal shocks tends to increase the size of the multipliers in recessions. (JEL C32, E62, H20, H62, H63)
BibTeX: @article{Auerbach2012a, author = {Alan J. Auerbach and Yuriy Gorodnichenko}, title = {Measuring the Output Responses to Fiscal Policy}, journal = {American Economic Journal: Economic Policy}, year = {2012}, volume = {4}, number = {2}, pages = {1-27}, url = {http://www.aeaweb.org/aej/pol/data/2010-0164_data.zip} }
Auerbach, A.J. and Gorodnichenko, Y.	Output Spillovers from Fiscal Policy [Abstract] [BibTeX]	2013	American Economic Review Vol. 103(3), pp. 141-46	article	URL
Abstract: For a large number of OECD countries we estimate the cross-country spillover effects of government purchases on output. Following the methodology in Auerbach and Gorodnichenko (2012a, b), we allow these multipliers to vary smoothly according to the state of the economy and use real-time forecast data to purge policy innovations of their predictable components. Our findings suggest that cross-country spillovers have an important impact. The findings also confirm those of our earlier papers--namely that fiscal shocks have a larger impact when the affected country is in recession.
BibTeX: @article{Auerbach2013, author = {Alan J. Auerbach and Yuriy Gorodnichenko}, title = {Output Spillovers from Fiscal Policy}, journal = {American Economic Review}, year = {2013}, volume = {103}, number = {3}, pages = {141-46}, url = {https://www.aeaweb.org/articles?id=10.1257/aer.103.3.141} }
Auerbach, A.J. and Gorodnichenko, Y.	Effects of Fiscal Shocks in a Globalized World [Abstract] [BibTeX]	2016	IMF Economic Review Vol. 64(1), pp. 177-215	article	URL
Abstract: Although theoretical models consistently predict that government spending shocks should lead to appreciation of the domestic currency, empirical studies have regularly found depreciation. Using daily data on U.S. defense spending (announced and actual payments), the paper documents that the dollar immediately and strongly appreciates after announcements about future government spending. In contrast, actual payments lead to no discernible effect on the exchange rate. It examines the responses of other variables at the daily frequency and explores how the response of the exchange rate to fiscal shocks varies over the business cycle as well as at the zero lower bound and in normal times.
BibTeX: @article{Auerbach2016, author = {Alan J Auerbach and Yuriy Gorodnichenko}, title = {Effects of Fiscal Shocks in a Globalized World}, journal = {IMF Economic Review}, year = {2016}, volume = {64}, number = {1}, pages = {177-215}, url = {http://link.springer.com/article/10.1057%2Fimfer.2015.15} }
Bachmann, R. and Sims, E.R.	Confidence and the transmission of government spending shocks [Abstract] [BibTeX]	2012	Journal of Monetary Economics Vol. 59(3), pp. 235-249	article	URL
Abstract: Is impacting confidence an important channel by which government spending shocks affect economic activity? In a standard structural VAR, an empirical measure of confidence does not significantly react to spending shocks and output multipliers are around one. In a non-linear VAR, confidence rises following an increase in spending during periods of economic slack and multipliers are much larger. The systematic response of confidence is irrelevant for the output multiplier during normal times, but is critical during recessions. Spending shocks during downturns predict productivity improvements through a persistent increase in government investment relative to consumption, which is reflected in higher confidence.
BibTeX: @article{Bachmann2012, author = {Bachmann, Rüdiger and Sims, Eric R.}, title = {Confidence and the transmission of government spending shocks}, journal = {Journal of Monetary Economics}, year = {2012}, volume = {59}, number = {3}, pages = {235-249}, url = {http://www.sciencedirect.com/science/article/pii/S0304393212000323} }
Bachmann, R., Elstner, S. and Sims, E.R.	Uncertainty and Economic Activity: Evidence from Business Survey Data [Abstract] [BibTeX]	2013	American Economic Journal: Macroeconomics Vol. 5(2), pp. 217-49	article	URL
Abstract: This paper uses survey expectations data to construct empirical proxies for time-varying business-level uncertainty. Access to the micro data from the German IFO Business Climate Survey permits construction of uncertainty measures based on both ex ante disagreement and ex post forecast errors. Ex ante disagreement is strongly correlated with dispersion in ex post forecast errors. Surprise movements in either measure lead to significant reductions in production that abate fairly quickly. We extend our analysis to US data, measuring uncertainty with forecast disagreement from the Business Outlook Survey. Surprise increases in forecast dispersion lead to more persistent reductions in production than in the German data. (JEL C53, C83, D81, E23, E27, E32, E37)
BibTeX: @article{Bachmann2013, author = {Rüdiger Bachmann and Steffen Elstner and Eric R. Sims}, title = {Uncertainty and Economic Activity: Evidence from Business Survey Data}, journal = {American Economic Journal: Macroeconomics}, year = {2013}, volume = {5}, number = {2}, pages = {217-49}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/mac.5.2.217} }
Bachmann, R. and Bai, J.H.	Politico-economic inequality and the comovement of government purchases [Abstract] [BibTeX]	2013	Review of Economic Dynamics Vol. 16(4), pp. 565 - 580	article	URL
Abstract: This paper explores the implications of economic and political inequality for the comovement of government purchases with macroeconomic fluctuations. We set up and compute a heterogeneous-agent neoclassical growth model, where households value government purchases which are financed by income taxes. A key feature of the model is a wealth bias in the political aggregation process. When calibrated to U.S. wealth inequality and exposed to aggregate productivity shocks, such a model is able to generate weaker positive comovement of government purchases than models with no political wealth bias. The wealth bias that matches the cross-sectional campaign contribution distribution by income is consistent with the mild positive comovement of government purchases in the aggregate data. We thus provide an empirically relevant example where economic and political heterogeneity matter for aggregate dynamics.
BibTeX: @article{Bachmann2013a, author = {Rüdiger Bachmann and Jinhui H. Bai}, title = {Politico-economic inequality and the comovement of government purchases}, journal = {Review of Economic Dynamics}, year = {2013}, volume = {16}, number = {4}, pages = {565 - 580}, url = {http://www.sciencedirect.com/science/article/pii/S1094202512000580} }
Baker, S.R., Bloom, N., Canes-Wrone, B., Davis, S.J. and Rodden, J.	Why Has US Policy Uncertainty Risen since 1960? [Abstract] [BibTeX]	2014	American Economic Review Vol. 104(5), pp. 56-60	article	URL
Abstract: We consider two classes of explanations for the rise in policy-related economic uncertainty in the United States since 1960. The first stresses growth in government spending, taxes, and regulation. A second stresses increased political polarization and its implications for the policymaking process and policy choices.
BibTeX: @article{Baker2014, author = {Scott R. Baker and Nicholas Bloom and Brandice Canes-Wrone and Steven J. Davis and Jonathan Rodden}, title = {Why Has US Policy Uncertainty Risen since 1960?}, journal = {American Economic Review}, year = {2014}, volume = {104}, number = {5}, pages = {56-60}, url = {https://www.aeaweb.org/atypon.php?doi=10.1257/aer.104.5.56} }
Baker, S.R., Bloom, N., Canes-Wrone, B., Davis, S.J. and Rodden, J.	Why Has US Policy Uncertainty Risen since 1960? [BibTeX]	2014	American Economic Review Vol. 104(5), pp. 56-60	article	URL
BibTeX: @article{Baker2014a, author = {Baker, Scott R. and Bloom, Nicholas and Canes-Wrone, Brandice and Davis, Steven J. and Rodden, Jonathan}, title = {Why Has US Policy Uncertainty Risen since 1960?}, journal = {American Economic Review}, year = {2014}, volume = {104}, number = {5}, pages = {56-60}, url = {http://www.aeaweb.org/articles?id=10.1257/aer.104.5.56} }
Barro, R.J.	Output Effects of Government Purchases [Abstract] [BibTeX]	1981	Journal of Political Economy Vol. 89(6), pp. 1086-1121	article	URL
Abstract: The theoretical analysis focuses on the distinction between temporary and permanent movements in government purchases. Under plausible conditions, the temporary case involves an output response that is positive, less than one-to-one with the change in government purchases, and larger than that generated by an equal-sized, but permanent, shift in purchases. The equilibrium real rate of return rises in the temporary case, but changes little in the permanent one. Defense purchases are divided empirically into "permanent" and "temporary" components by considering the role of (temporary) wars. No temporary shifts in nondefense purchases were isolated. Empirical results verify an expansionary output effect for temporary purchases that exceeds that of permanent purchases. The results for some other expectational hypotheses are found to be generally sup- portive of the theory.
BibTeX: @article{Barro1981, author = {Barro, Robert J}, title = {Output Effects of Government Purchases}, journal = {Journal of Political Economy}, year = {1981}, volume = {89}, number = {6}, pages = {1086-1121}, url = {http://dx.doi.org/10.1086/261024} }
Barro, R.J.	Government spending, interest rates, prices, and budget deficits in the United Kingdom, 1701-1918 [Abstract] [BibTeX]	1987	Journal of Monetary Economics Vol. 20(2), pp. 221-247	article	URL
Abstract: The British data from the early 1700s through World War I provide an unmatched opportunity for studying the effects of temporary changes in government purchases. In this paper I examine the effects of these changes on interest rates, the quantity of money, the price level, and budget deficits. Temporary increases in government purchases--showing up in the sample as increases in military outlays during wartime--had positive effects on long-term interest rates. The effect on the growth rate of money (bank notes) was positive only during the two periods of suspension of the gold standard (1797-1821 and 1914-1918). As long as convertibility of bank notes into specie was maintained, there was no systematic relation of government spending to monetary growth. Similarly, the main interplay between temporary government spending and inflation occurred during the periods of suspension. Temporary changes in military spending accounted for the bulk of budget deficits from the early 1700s through 1918. This association explains the main increases in the ratio of the public debt to GNP, as well as the decreases that typically occurred during peacetime. Over the sample of more than two hundred years, I found only two examples of major budget deficits that were unrelated to wartime -- one associated with compensation payments to slaveowners in 1835-36 and the other with a political dispute over the income tax in 1909-10. Because of the "exogeneity" of these deficits, it is interesting that interest rates showed no special movements at these times.
BibTeX: @article{Barro1987, author = {Barro, Robert J.}, title = {Government spending, interest rates, prices, and budget deficits in the United Kingdom, 1701-1918}, journal = {Journal of Monetary Economics}, year = {1987}, volume = {20}, number = {2}, pages = {221-247}, url = {http://www.sciencedirect.com/science/article/pii/0304-3932(87)90015-8} }
Barro, R.J.	The economic effects of budget deficits and government spending : Introduction [Abstract] [BibTeX]	1987	Journal of Monetary Economics Vol. 20(2), pp. 191-193	article	URL
Abstract: No abstract is available for this item.
BibTeX: @article{Barro1987a, author = {Barro, Robert J.}, title = {The economic effects of budget deficits and government spending : Introduction}, journal = {Journal of Monetary Economics}, year = {1987}, volume = {20}, number = {2}, pages = {191-193}, url = {http://www.sciencedirect.com/science/article/pii/0304-3932(87)90013-4} }
Barro, R.J.	Government Spending in a Simple Model of Endogenous Growth [Abstract] [BibTeX]	1990	Journal of Political Economy Vol. 98(5), pp. S103-26	article	URL
Abstract: One strand of endogenous-growth models assumes constant returns to a broad concept of capital. The author extends these models to include tax-financed government services that affect production or utility. Growth and saving rates fall with an increase in utility-type expenditures; the two rates rise initially with productive government expenditures, but subsequently decline. With an income tax, the decentralized choices of growth and saving are "too low"; but if the production function is Cobb-Douglas, the optimizing government still satisfies a natural condition for productive efficiency. Empirical evidence across countries supports some of the hypotheses about government and growth.
BibTeX: @article{Barro1990, author = {Barro, Robert J}, title = {Government Spending in a Simple Model of Endogenous Growth}, journal = {Journal of Political Economy}, year = {1990}, volume = {98}, number = {5}, pages = {S103-26}, url = {http://links.jstor.org/sici?sici=0022-3808%28199010%2998%3A5%3CS103%3AGSIASM%3E2.0.CO%3B2-T&origin=repec} }
Barro, R.J. and Redlick, C.J.	Macroeconomic Effects From Government Purchases and Taxes [Abstract] [BibTeX]	2011	The Quarterly Journal of Economics Vol. 126(1), pp. 51-102	article	URL
Abstract: For U.S. annual data that include World War II, the estimated multiplier for temporary defense spending is 0.4--0.5 contemporaneously and 0.6--0.7 over 2 years. If the change in defense spending is "permanent" (gauged by Ramey's defense news variable), the multipliers are higher by 0.1--0.2. Since all estimated multipliers are significantly less than 1, greater spending crowds out other components of GDP, particularly investment. The lack of good instruments prevents estimation of reliable multipliers for nondefense purchases; multipliers in the literature of two or more likely reflect reverse causation from GDP to nondefense purchases. Increases in average marginal income tax rates (measured by a newly constructed time series) have significantly negative effects on GDP. When interpreted as a tax multiplier, the magnitude is around 1.1. The combination of the estimated spending and tax multipliers implies that the balanced-budget multiplier for defense spending is negative. We have some evidence that tax changes affect GDP mainly through substitution effects, rather than wealth effects.
BibTeX: @article{Barro2011, author = {Robert J. Barro and Charles J. Redlick}, title = {Macroeconomic Effects From Government Purchases and Taxes}, journal = {The Quarterly Journal of Economics}, year = {2011}, volume = {126}, number = {1}, pages = {51-102}, url = {http://hdl.handle.net/10.1093/qje/qjq002} }
Baxter, M.	The role of expectations in stabilization policy [Abstract] [BibTeX]	1985	Journal of Monetary Economics Vol. 15(3), pp. 343 - 362	article	DOI URL
Abstract: This paper develops and tests a theory of the process by which private agents in an economy form expectations about government policy. Agents form and update their beliefs about the true state of government policy in a Bayesian fashion. The ‘credibility’ of a policy is defined to be the subjective probability that the government is pursuing a 'reform' policy rule. The ‘credibility’ of a reform of monetary or exchange rate policies is a function of the parameters of both monetary and fiscal policies. The theory is applied to the Chilean and Argentine exchange reforms of the late 1970's.
BibTeX: @article{BAXTER1985343, author = {Marianne Baxter}, title = {The role of expectations in stabilization policy}, journal = {Journal of Monetary Economics}, year = {1985}, volume = {15}, number = {3}, pages = {343 - 362}, url = {http://www.sciencedirect.com/science/article/pii/0304393285900212}, doi = {http://doi.org/10.1016/0304-3932(85)90021-2} }
Baxter, M. and King, R.G.	Fiscal Policy in General Equilibrium [Abstract] [BibTeX]	1993	American Economic Review Vol. 83(3), pp. 315-34	article	URL
Abstract: This paper studies four classic fiscal-policy experiments within a quantitatively restricted neoclassical model. The authors' main findings are as follows: (1) permanent changes in government purchases can lead to short-run and long-run output multipliers that exceed one; (2) permanent changes in government purchases induce larger effects than temporary changes; (3) the financing decision is quantitatively more important than the resource cost of changes in government purchases; and (4) public investment has dramatic effects on private output and investment. These findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy.
BibTeX: @article{Baxter1993, author = {Baxter, Marianne and King, Robert G}, title = {Fiscal Policy in General Equilibrium}, journal = {American Economic Review}, year = {1993}, volume = {83}, number = {3}, pages = {315-34}, url = {http://links.jstor.org/sici?sici=0002-8282%28199306%2983%3A3%3C315%3AFPIGE%3E2.0.CO%3B2-A&origin=repec} }
Beaudry, P. and Portier, F.	News-driven business cycles: Insights and challenges [Abstract] [BibTeX]	2014	Journal of Economic Literature Vol. 52(4), pp. 993-1074	article	URL
Abstract: There is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations. The news view of business cycles offers a formalization of this perspective. In this paper we discuss mechanisms by which changes in agents' information, due to the arrival of news, can cause business cycle fluctuations driven by expectational change, and we review the empirical evidence aimed at evaluating their relevance. In particular, we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations, while at the same time we emphasize the many challenges that must be addressed before a proper assessment of the role of news in business cycles can be established.
BibTeX: @article{Beaudry2014, author = {Beaudry, Paul and Portier, Franck}, title = {News-driven business cycles: Insights and challenges}, journal = {Journal of Economic Literature}, publisher = {American Economic Association}, year = {2014}, volume = {52}, number = {4}, pages = {993--1074}, url = {http://www.ingentaconnect.com/content/aea/jel/2014/00000052/00000004/art00001} }
Beetsma, R., Giuliodori, M. and Wierts, P.	Planning to cheat: EU fiscal policy in real time [Abstract] [BibTeX]	2009	Economic Policy Vol. 24, pp. 753-804	article	URL
Abstract: Using real-time data from Europe's Stability and Convergence Programs, we explore how fiscal plans and their implementation in the EU are determined. We find that (1) implemented budgetary adjustment falls systematically short of planned adjustment and this shortfall increases with the projection horizon, (2) variability in the eventual fiscal outcomes is dominated by the implementation errors, (3) there is a limited role for 'traditional' political variables, (4) stock-flow adjustments are more important when plans are more ambitious, and (5), most importantly, both the ambition in fiscal plans and their implementation benefit from stronger national fiscal institutions. We emphasize also the importance of credible plans for the eventual fiscal outcomes.
BibTeX: @article{Beetsma2009a, author = {Roel Beetsma and Massimo Giuliodori and Peter Wierts}, title = {Planning to cheat: EU fiscal policy in real time}, journal = {Economic Policy}, year = {2009}, volume = {24}, pages = {753-804}, url = {http://economicpolicy.oxfordjournals.org/content/24/60/753.abstract} }
Beetsma, R. and Giuliodori, M.	Fiscal adjustment to cyclical developments in the OECD: an empirical analysis based on real-time data [Abstract] [BibTeX]	2010	Oxford Economic Papers Vol. 62(3), pp. 419-441	article	URL
Abstract: Using real-time data, we explore the determinants of both fiscal plans and their implementation for OECD countries over the period 1995--2006. First, based on forecasts we estimate standard fiscal rules. Then, we explore how fiscal policy responds to new information, especially on the business cycle. There are marked differences in behaviour between the planning and implementation stages, as well as between the fiscal policy of EU countries and other OECD countries. Planned fiscal policy is a-cyclical for EU countries and counter-cyclical for the other countries. However, in the implementation stage, the EU countries react pro-cyclically to unexpected changes in the output gap, while the responses of the other OECD countries are a-cyclical. Hence, the empirical distinction between the two fiscal stages is crucial, while the relatively strong emphasis on ex ante, as opposed to ex post, compliance with fiscal rules (such as Europe's Stability and Convergence Programs) seems misguided.
BibTeX: @article{Beetsma2010a, author = {Roel Beetsma and Massimo Giuliodori}, title = {Fiscal adjustment to cyclical developments in the OECD: an empirical analysis based on real-time data}, journal = {Oxford Economic Papers}, year = {2010}, volume = {62}, number = {3}, pages = {419-441}, url = {http://oep.oxfordjournals.org/content/62/3/419.full.pdf+html} }
Beetsma, R., Giuliodori, M., Walschot, M. and Wierts, P.	Fifty years of fiscal planning and implementation in the Netherlands [Abstract] [BibTeX]	2013	European Journal of Political Economy Vol. 31(C), pp. 119-138	article	URL
Abstract: Using real-time data from the annual budgets over the period 1958-2009, we explore budgetary planning and implementation in the Netherlands. Three fiscal policy regimes are distinguished. Our key findings are the following. First, plans are on average unbiased, although they are overoptimistic during earlier parts of our sample and overly pessimistic during the later parts of our sample, when revenues are under-projected. Second, general economic conditions and the state of the public finances are important determinants of both plans and their implementation. Third, this is also the case for political and institutional factors. Expenditure overruns are partly related to political factors, whereas cautious revenue forecasts relate to the institutional setting. Fourth, under the most recent regime of "trend-based budgeting" implementation was strongest relative to planning. In fact, this regime may contain some elements that are useful for designing national fiscal arrangements elsewhere.
BibTeX: @article{Beetsma2013, author = {Beetsma, Roel and Giuliodori, Massimo and Walschot, Mark and Wierts, Peter}, title = {Fifty years of fiscal planning and implementation in the Netherlands}, journal = {European Journal of Political Economy}, year = {2013}, volume = {31}, number = {C}, pages = {119-138}, url = {http://www.sciencedirect.com/science/article/pii/S017626801300027X} }
Beetsma, R., Cimadomo, J., Furtuna, O. and Giuliodori1, M.	The confidence effects of fiscal consolidations [Abstract] [BibTeX]	2015	Economic Policy Vol. 30(83), pp. 439-489	article	URL
Abstract: We explore how fiscal consolidations affect private sector confidence, a possible channel for the transmission of fiscal policy that has received particular attention recently as a result of governments embarking on austerity trajectories in the aftermath of the crisis. Panel regressions based on the annual action-based datasets of Devries et al. (2011) and Alesina et al. (2014a) show that consolidations, and in particular their unanticipated components, affect confidence negatively. To obtain a more accurate picture of how consolidations affect confidence, we construct a monthly dataset of consolidation announcements, so that we can investigate the confidence effects in real time using an event study. The results suggest that consumer confidence falls around announcements of consolidation measures, an effect likely driven by revenue-based measures. Moreover, these effects are highly relevant for European countries with weak institutional arrangements, as measured by the tightness of fiscal rules or budgetary transparency. The effects on producer confidence are generally similar, but weaker than for consumer confidence. Long-term interest rates, as a measure of confidence in the sovereign, tend to fall around spending-based consolidation announcements. We have no evidence that the confidence effects of consolidation announcements are worse in slumps than in booms. Generally, strengthening institutional arrangements may help in mitigating adverse confidence effects of consolidations.
BibTeX: @article{Beetsma2015, author = {Roel Beetsma and Jacopo Cimadomo and Oana Furtuna and Massimo Giuliodori1}, title = {The confidence effects of fiscal consolidations}, journal = {Economic Policy}, year = {2015}, volume = {30}, number = {83}, pages = {439-489}, url = {http://hdl.handle.net/10.1093/epolic/eiv007} }
Bekaert, G., Hoerova, M. and Lo Duca, M.	Risk, uncertainty and monetary policy [Abstract] [BibTeX]	2013	Journal of Monetary Economics Vol. 60(7), pp. 771-788	article	URL
Abstract: The VIX, the stock market option-based implied volatility, strongly co-moves with measures of the monetary policy stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility ("uncertainty"), we find that a lax monetary policy decreases both risk aversion and uncertainty, with the former effect being stronger. The result holds in a structural vector autoregressive framework, controlling for business cycle movements and using a variety of identification schemes for the vector autoregression in general and monetary policy shocks in particular. The effect of monetary policy on risk aversion is also apparent in regressions using high frequency data.
BibTeX: @article{Bekaert2013, author = {Bekaert, Geert and Hoerova, Marie and Lo Duca, Marco}, title = {Risk, uncertainty and monetary policy}, journal = {Journal of Monetary Economics}, year = {2013}, volume = {60}, number = {7}, pages = {771-788}, url = {http://www.sciencedirect.com/science/article/pii/S0304393213000871} }
Bekaert, G. and Hoerova, M.	The VIX, the variance premium and stock market volatility [Abstract] [BibTeX]	2014	Journal of Econometrics Vol. 183(2), pp. 181-192	article	URL
Abstract: We decompose the squared VIX index, derived from US S&P500 options prices, into the conditional variance of stock returns and the equity variance premium. We evaluate a plethora of state-of-the-art volatility forecasting models to produce an accurate measure of the conditional variance. We then examine the predictive power of the VIX and its two components for stock market returns, economic activity and financial instability. The variance premium predicts stock returns while the conditional stock market variance predicts economic activity and has a relatively higher predictive power for financial instability than does the variance premium.
BibTeX: @article{Bekaert2014, author = {Bekaert, Geert and Hoerova, Marie}, title = {The VIX, the variance premium and stock market volatility}, journal = {Journal of Econometrics}, year = {2014}, volume = {183}, number = {2}, pages = {181-192}, url = {http://www.sciencedirect.com/science/article/pii/S0304407614001110} }
Berge, T.J. and Jordà, Ò.	Evaluating the Classification of Economic Activity into Recessions and Expansions [Abstract] [BibTeX]	2011	American Economic Journal: Macroeconomics Vol. 3(2), pp. 246-77	article	URL
Abstract: The Business Cycle Dating Committee of the National Bureau of Economic Research provides a historical chronology of business cycle turning points. We investigate three central aspects of this chronology. How skillful is the Dating Committee when classifying economic activity into expansions and recessions? Which indices of economic conditions best capture the current but unobservable state of the business cycle? And which indicators best predict future turning points, and at what horizons? We answer each of these questions in detail using methods specifically designed to assess classification ability. In the process, we clarify several important features of the business cycle. (JEL C82, E32)
BibTeX: @article{Berge2011, author = {Travis J. Berge and Òscar Jordà}, title = {Evaluating the Classification of Economic Activity into Recessions and Expansions}, journal = {American Economic Journal: Macroeconomics}, year = {2011}, volume = {3}, number = {2}, pages = {246-77}, url = {http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.2.246} }
Bernal, O., Gnabo, J.-Y. and Guilmin, G.	Economic policy uncertainty and risk spillovers in the Eurozone [Abstract] [BibTeX]	2016	Journal of International Money and Finance Vol. 65(C), pp. 24-45	article	URL
Abstract: This paper focuses on the impact of economic policy uncertainty on risk spillovers within the Eurozone and contributes to these two growing literatures. To this end, we adapt the two-step procedure developed by Adrian and Brunnermeier (forthcoming) in the framework of financial systemic risk to the sovereign bond market. Accordingly, we attempt (i) to measure the extent to which distress affecting one given country's sovereign spreads can affect the Eurozone's bond market as a whole and then (ii) to identify the determinants of risk spillovers by estimating a panel data model with macroeconomic state variables and economic policy uncertainty (EPU) indices introduced by Baker et al. (2013) as regressors. EPU indices considered concern the four largest Eurozone countries, i.e. Germany, France, Italy and Spain, as well as the United States. The model is estimated with quarterly data for ten countries representing the bulk of debt issuances within the Eurozone over a period ranging from Q4/2008 to Q2/2013, which is characterized by historically high dispersion of sovereign bond spreads either across time or across countries. Our results support the idea that economic policy uncertainty in the core economies of the Eurozone, i.e. Germany and France, as well as in the largest periphery countries, i.e. Italy and Spain, can create an environment likely to exacerbate the transmission of risk arising from abnormal developments of individual countries' sovereign spreads to the Eurozone bond market as a whole. In this respect, our results plead for larger effort of Eurozone "leaders" to reduce the uncertainty surrounding their economic policy in periods of crisis not only to avoid adverse effects on their own economies but also to reduce the risk of a destabilization of the Eurozone sovereign bond market as a whole.
BibTeX: @article{Bernal2016, author = {Bernal, Oscar and Gnabo, Jean-Yves and Guilmin, Grégory}, title = {Economic policy uncertainty and risk spillovers in the Eurozone}, journal = {Journal of International Money and Finance}, year = {2016}, volume = {65}, number = {C}, pages = {24-45}, url = {http://www.sciencedirect.com/science/article/pii/S0261560616300092} }
Bi, H.	Sovereign default risk premia, fiscal limits, and fiscal policy [Abstract] [BibTeX]	2012	European Economic Review Vol. 56(3), pp. 389-410	article	URL
Abstract: We develop a closed economy model to study the interactions among sovereign risk premia, fiscal limits, and fiscal policy. The fiscal limits, which measure the government's ability to service its debt, arise endogenously from dynamic Laffer curves. The state-dependent distributions of fiscal limits depend on the growth of lump-sum transfers, the size of the government, the degree of countercyclical policy responses, and economic diversity. The country-specific fiscal limits imply that the market perceives the riskiness of sovereign debt issued by different countries to be different, which is consistent with the observation that developed countries are downgraded at different levels of debt. A nonlinear relationship between sovereign risk premia and the level of government debt emerges in equilibrium, which is in line with the empirical evidence that once risk premia begin to rise, they do so rapidly. Nonlinear simulations show that fiscal austerity measures that aim to balance the government budget in the short run fail to contain the default risk premium, even with sizeable cuts in government purchases; but a long-term plan for fiscal reform, if it credibly changes the market's expectation about future fiscal policies, can alleviate the rising risk premium.
BibTeX: @article{Bi2012, author = {Bi, Huixin}, title = {Sovereign default risk premia, fiscal limits, and fiscal policy}, journal = {European Economic Review}, year = {2012}, volume = {56}, number = {3}, pages = {389-410}, url = {http://www.sciencedirect.com/science/article/pii/S0014292111001085} }
Bi, H., Leeper, E.M. and Leith, C.	Uncertain Fiscal Consolidations [Abstract] [BibTeX]	2013	Economic Journal Vol. 0, pp. F31-F63	article	URL
Abstract: The paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition are uncertain. Drawing on the evidence in Alesina and Ardagna (2010), we emphasize whether or not the fiscal consolidation is driven by tax rises or expenditure cuts. We find that the composition of the fiscal consolidation, its duration, the monetary policy stance, the level of government debt and expectations over the likelihood and composition of fiscal consolidations all matter in determining the extent to which a given consolidation is expansionary and/or successful in stabilizing government debt.
BibTeX: @article{Bi2013a, author = {Huixin Bi and Eric M. Leeper and Campbell Leith}, title = {Uncertain Fiscal Consolidations}, journal = {Economic Journal}, year = {2013}, volume = {0}, pages = {F31-F63}, url = {http://hdl.handle.net/10.1111/} }
Bilbiie, F.O., Meier, A. and Müller, G.J.	What Accounts for the Changes in U.S. Fiscal Policy Transmission? [Abstract] [BibTeX]	2008	Journal of Money, Credit and Banking Vol. 40(7), pp. 1439-1470	article	URL
Abstract: Using vector autoregressions on U.S. time series for 1957-79 and 1983-2004, we find government spending shocks to have stronger effects on output, consumption, and wages in the earlier period. We try to account for this observation within a DSGE model featuring price rigidities and limited asset market participation. Specifically, we estimate the structural parameters of the model for both periods by matching impulse responses. Model-based counterfactual experiments suggest that most of the changes in fiscal policy transmission are accounted for by increased asset market participation and the more active monetary policy of the Volcker-Greenspan period.
BibTeX: @article{Bilbiie2008, author = {Florin O. Bilbiie and André Meier and Gernot J. Müller}, title = {What Accounts for the Changes in U.S. Fiscal Policy Transmission?}, journal = {Journal of Money, Credit and Banking}, year = {2008}, volume = {40}, number = {7}, pages = {1439-1470}, url = {http://www.blackwell-synergy.com/doi/abs/10.1111/j.1538-4616.2008.00166.x} }
Blanchard, O. and Perotti, R.	An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output [BibTeX]	2002	The Quarterly Journal of Economics Vol. 117(4), pp. 1329-1368	article	URL
BibTeX: @article{Blanchard2002, author = {Olivier Blanchard and Roberto Perotti}, title = {An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output}, journal = {The Quarterly Journal of Economics}, year = {2002}, volume = {117}, number = {4}, pages = {1329-1368}, url = {https://www.jstor.org/stable/4132480?seq=1#page_scan_tab_contents} }
Blanchard, O.J. and Leigh, D.	Growth Forecast Errors and Fiscal Multipliers [Abstract] [BibTeX]	2013	American Economic Review Vol. 103(3), pp. 117-20	article	URL
Abstract: This paper investigates the relation between growth forecast errors and planned fiscal consolidation during the crisis. We find that, in advanced economies, stronger planned fiscal consolidation has been associated with lower growth than expected. The relation is particularly strong, both statistically and economically, early in the crisis. A natural interpretation is that fiscal multipliers were substantially higher than implicitly assumed by forecasters. The weaker relation in more recent years may in part reflect learning by forecasters and in part smaller multipliers than in the early years of the crisis.
BibTeX: @article{Blanchard2013, author = {Olivier J. Blanchard and Daniel Leigh}, title = {Growth Forecast Errors and Fiscal Multipliers}, journal = {American Economic Review}, year = {2013}, volume = {103}, number = {3}, pages = {117-20}, url = {http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.3.117} }
Bloom, N.	The Impact of Uncertainty Shocks [Abstract] [BibTeX]	2009	Econometrica Vol. 77(3), pp. 623-685	article	URL
Abstract: Uncertainty appears to jump up after major shocks like the Cuban Missile crisis, the assassination of JFK, the OPEC I oil-price shock, and the 9/11 terrorist attacks. This paper offers a structural framework to analyze the impact of these uncertainty shocks. I build a model with a time-varying second moment, which is numerically solved and estimated using firm-level data. The parameterized model is then used to simulate a macro uncertainty shock, which produces a rapid drop and rebound in aggregate output and employment. This occurs because higher uncertainty causes firms to temporarily pause their investment and hiring. Productivity growth also falls because this pause in activity freezes reallocation across units. In the medium term the increased volatility from the shock induces an overshoot in output, employment, and productivity. Thus, uncertainty shocks generate short sharp recessions and recoveries. This simulated impact of an uncertainty shock is compared to vector autoregression estimations on actual data, showing a good match in both magnitude and timing. The paper also jointly estimates labor and capital adjustment costs (both convex and nonconvex). Ignoring capital adjustment costs is shown to lead to substantial bias, while ignoring labor adjustment costs does not.
BibTeX: @article{Bloom2009, author = {Nicholas Bloom}, title = {The Impact of Uncertainty Shocks}, journal = {Econometrica}, year = {2009}, volume = {77}, number = {3}, pages = {623-685}, url = {http://onlinelibrary.wiley.com/doi/10.3982/ECTA6248/abstract;jsessionid=FE0D88739E764BC2B8EEC00E4EAE5E35.f04t03} }
Bloom, N.	Fluctuations in Uncertainty [BibTeX]	2014	Journal of Economic Perspectives Vol. 28(2), pp. 153-76	article	URL
BibTeX: @article{Bloom2014, author = {Bloom, Nicholas}, title = {Fluctuations in Uncertainty}, journal = {Journal of Economic Perspectives}, year = {2014}, volume = {28}, number = {2}, pages = {153-76}, url = {http://www.aeaweb.org/articles?id=10.1257/jep.28.2.153} }
Born, B., Peter, A. and Pfeifer, J.	Fiscal news and macroeconomic volatility [Abstract] [BibTeX]	2013	Journal of Economic Dynamics and Control Vol. 37(12), pp. 2582-2601	article	URL
Abstract: This paper analyzes the contribution of anticipated capital and labor tax shocks to business cycle volatility in an estimated New Keynesian business cycle model. While fiscal policy accounts for about 15% of output variance at business cycle frequencies, this mostly derives from anticipated government spending shocks. Tax shocks, both anticipated and unanticipated, contribute little to the fluctuations of real variables. However, anticipated capital tax shocks do explain a sizable part of inflation fluctuations, accounting for up to 12% of its variance. In line with earlier studies, news shocks in total account for about 50% of output variance. Further decomposing this news effect, we find permanent total factor productivity news shocks to be most important. When looking at the federal level instead of total government, the importance of anticipated tax and spending shocks significantly increases, suggesting that fiscal policy at the subnational level typically counteracts the effects of federal fiscal policy shocks.
BibTeX: @article{Born2013, author = {Born, Benjamin and Peter, Alexandra and Pfeifer, Johannes}, title = {Fiscal news and macroeconomic volatility}, journal = {Journal of Economic Dynamics and Control}, year = {2013}, volume = {37}, number = {12}, pages = {2582-2601}, url = {http://www.sciencedirect.com/science/article/pii/S0165188913001437} }
Burriel, P., de Castro, F., Garrote, D., Gordo, E., Paredes, J. and Pérez, J.J.	Fiscal Policy Shocks in the Euro Area and the US: An Empirical Assessment [Abstract] [BibTeX]	2010	Fiscal Studies Vol. 31(2), pp. 251-285	article	URL
Abstract: We analyse the impact of fiscal policy shocks in the euro area as a whole, using a newly available quarterly dataset of fiscal variables for the period 1981-2007. To allow for comparability with previous results on euro area countries and the US, we use a standard structural VAR framework, and study the impact of aggregated and disaggregated government spending and net taxes shocks. In addition, to frame euro area results, we apply the same methodology for the same sample period to US data. We also explore the sensitivity of the provided results to the inclusion of variables aiming at measuring "financial stress" (increases in risk) and "fiscal stress" (sustainability concerns). Analysing US and euro area data with a common methodology provides some interesting insights on the interpretation of fiscal policy shocks.
BibTeX: @article{Burriel2010, author = {Pablo Burriel and Francisco de Castro and Daniel Garrote and Esther Gordo and Joan Paredes and Javier J. Pérez}, title = {Fiscal Policy Shocks in the Euro Area and the US: An Empirical Assessment}, journal = {Fiscal Studies}, year = {2010}, volume = {31}, number = {2}, pages = {251-285}, url = {http://onlinelibrary.wiley.com/doi/10.1111/j.1475-5890.2010.00114.x/abstract;jsessionid=638FD422F75B02C354354843AE250BE4.f01t02?systemMessage=Wiley+Online+Library+will+be+unavailable+on+Saturday+30th+July+2016+from+08%3A00-11%3A00+BST+%2F+03%3A00-06%3A00+EST+%2F+15%3A00-18%3A00+SGT+for+essential+maintenance.Apologies+for+the+inconvenience.} }
Caggiano, G., Castelnuovo, E., Colombo, V. and Nodari, G.	Estimating Fiscal Multipliers: News From A Non-linear World [BibTeX]	2015	The Economic Journal Vol. 125(584), pp. 746-776	article	URL
BibTeX: @article{Caggiano2015, author = {Caggiano, Giovanni and Castelnuovo, Efrem and Colombo, Valentina and Nodari, Gabriela}, title = {Estimating Fiscal Multipliers: News From A Non-linear World}, journal = {The Economic Journal}, publisher = {Wiley Online Library}, year = {2015}, volume = {125}, number = {584}, pages = {746--776}, url = {http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12263/full} }
Cameron, A.C. and Miller, D.L.	A practitioner's guide to cluster-robust inference [BibTeX]	2015	Journal of Human Resources Vol. 50(2), pp. 317-372	article	URL
BibTeX: @article{Cameron2015, author = {Cameron, A Colin and Miller, Douglas L}, title = {A practitioner's guide to cluster-robust inference}, journal = {Journal of Human Resources}, publisher = {University of Wisconsin Press}, year = {2015}, volume = {50}, number = {2}, pages = {317--372}, url = {http://jhr.uwpress.org/content/50/2/317.short} }
Canova, F. and Pappa, E.	Fiscal policy, pricing frictions and monetary accommodation [Abstract] [BibTeX]	2011	Economic Policy Vol. 26(68), pp. 555-598	article	URL
Abstract: We investigate the theoretical conditions for effectiveness of government consumption expenditure expansions using US, Euro area and UK data. Fiscal expansions taking place when monetary policy is accommodative lead to large output multipliers in normal times. The 2009-2010 packages need not produce significant output multipliers, may have moderate debt effects, and only generate temporary inflation. Expenditure expansions accompanied by deficit/debt consolidations schemes may lead to short run output gains but their success depends on how monetary policy and expectations behave. Trade openness and the cyclicality of the labor wedge explain cross-country differences in the magnitude of the multipliers.
BibTeX: @article{Canova2011, author = {Fabio Canova and Evi Pappa}, title = {Fiscal policy, pricing frictions and monetary accommodation}, journal = {Economic Policy}, year = {2011}, volume = {26}, number = {68}, pages = {555-598}, url = {http://economicpolicy.oxfordjournals.org/content/26/68/555} }
Canova, F. and Ciccarelli, M.	Panel Vector Autoregressive Models: A Survey [Abstract] [BibTeX]	2013	VAR Models in Macroeconomics--New Developments and Applications: Essays in Honor of Christopher A. Sims (Advances in Econometrics, Volume 32) Emerald Group Publishing Limited Vol. 32, pp. 205-246	article	URL
Abstract: This article provides an overview of the panel vector autoregressive models (VAR) used in macroeconomics and finance to study the dynamic relationships between heterogeneous assets, households, firms, sectors, and countries. We discuss what their distinctive features are, what they are used for, and how they can be derived from economic theory. We also describe how they are estimated and how shock identification is performed. We compare panel VAR models to other approaches used in the literature to estimate dynamic models involving heterogeneous units. Finally, we show how structural time variation can be dealt with.
BibTeX: @article{Canova2013, author = {Canova, Fabio and Ciccarelli, Matteo}, title = {Panel Vector Autoregressive Models: A Survey}, journal = {VAR Models in Macroeconomics--New Developments and Applications: Essays in Honor of Christopher A. Sims (Advances in Econometrics, Volume 32) Emerald Group Publishing Limited}, publisher = {Emerald Group Publishing Limited}, year = {2013}, volume = {32}, pages = {205--246}, url = {http://www.emeraldinsight.com/doi/pdfplus/10.1108/S0731-9053%282013%290000031006} }
de Castro, F.	Non-Keynesian effects of public expenditure in Spain [Abstract] [BibTeX]	2003	Applied Economics Letters Vol. 10(10), pp. 651-655	article	URL
Abstract: Evidence is provided of non-Keynesian effects of fiscal policy in Spain within a VAR framework. Shocks to government expenditure expand activity, although moderately, in the short term, with output multipliers slightly above one. In the medium term, however, the response of output becomes significantly negative. The two main explanations proposed in the literature seem to apply here, namely higher real interest rates as a result of higher risk premia on the demand side and higher equilibrium wage reducing entrepreneurial profits and investment accordingly on the supply side.
BibTeX: @article{Castro2003, author = {Francisco de Castro}, title = {Non-Keynesian effects of public expenditure in Spain}, journal = {Applied Economics Letters}, year = {2003}, volume = {10}, number = {10}, pages = {651-655}, url = {http://www.tandfonline.com/doi/pdf/10.1080/1350485032000136397} }
de Castro, F., González-Páramo, J.M. and de Cos, P.H.	Fiscal consolidation in Spain: dynamic interdependence of public spending and revenues [Abstract] [BibTeX]	2004	Investigaciones Economicas Vol. 28(1), pp. 193-207	article	URL
Abstract: Meeting fiscal targets set out in the Stability and Growth Pact for EMU countries requires the correction of fiscal imbalances. We consider what is the most efficient strategy to achieve permanent reductions in fiscal defficits in Spain. We analyse the possible interdependence between expenditure and revenues by performing standard Granger causality tests. We find that there is a bias towards defficit in public sector size and long-run bidirectional causality between public revenues and expenditure, although the direction of causality seems to hold mainly from public expenditure to revenues. Achieving fiscal consolidation should be based reducing structural public expenditure.
BibTeX: @article{Castro2004, author = {Francisco de Castro and José M. González-Páramo and Pablo Hernández de Cos}, title = {Fiscal consolidation in Spain: dynamic interdependence of public spending and revenues}, journal = {Investigaciones Economicas}, year = {2004}, volume = {28}, number = {1}, pages = {193-207}, url = {ftp://ftp.fundacionsepi.es/InvEcon/paperArchive/Ene2004/v28i1a7.pdf} }
de Castro, F.	The macroeconomic effects of fiscal policy in Spain [Abstract] [BibTeX]	2006	Applied Economics Vol. 38(8), pp. 913-924	article	URL
Abstract: This paper focuses on the effects of fiscal policy in Spain analysed in a VAR context. Fiscal shocks are found to involve significant effects on GDP, private consumption, private investment, interest rates and prices. Non-Keynesian effects are observed. Moreover, evidence on the channels highlighted in the literature for such effects to arise is found, notably the effects of permanent income on consumption and investment on the demand side, coupled with the response of the equilibrium wage on the supply side affecting entrepreneurial profits and investment. The response of interest rates seems to reinforce both effects. Furthermore, the different readings of spending or taxes do not affect macroeconomic variables homogeneously.
BibTeX: @article{Castro2006, author = {Francisco de Castro}, title = {The macroeconomic effects of fiscal policy in Spain}, journal = {Applied Economics}, year = {2006}, volume = {38}, number = {8}, pages = {913-924}, url = {http://www.tandfonline.com/doi/abs/10.1080/00036840500369225} }
de Castro, F. and Hernández de Cos, P.	The economic effects of fiscal policy: The case of Spain [Abstract] [BibTeX]	2008	Journal of Macroeconomics Vol. 30(3), pp. 1005-1028	article	URL
Abstract: This paper estimates the effects of exogenous fiscal policy shocks in Spain in a VAR framework. Government expenditure expansionary shocks are found to have positive effects on output in the short-term at the cost of higher inflation and public deficits and lower output in the medium and long term. Tax increases are found to drag economic activity in the medium term while entailing an only temporary improvement of the public budget balance. The application of these results to the analysis of fiscal policy in Spain since the mid-90s points to the conclusion that the consolidation process does not seem to have involved costs in terms of output growth. Moreover, the stance of fiscal policy has become more counter-cyclical in that period.
BibTeX: @article{Castro2008, author = {de Castro, Francisco and Hernández de Cos, Pablo}, title = {The economic effects of fiscal policy: The case of Spain}, journal = {Journal of Macroeconomics}, year = {2008}, volume = {30}, number = {3}, pages = {1005-1028}, url = {http://www.sciencedirect.com/science/article/pii/S0164-0704(07)00108-5} }
Christiano, L., Eichenbaum, M. and Rebelo, S.	When Is the Government Spending Multiplier Large? [Abstract] [BibTeX]	2011	Journal of Political Economy Vol. 119(1), pp. 78-121	article	URL
Abstract: We argue that the government-spending multiplier can be much larger than one when the zero lower bound on the nominal interest rate binds. The larger the fraction of government spending that occurs while the nominal interest rate is zero, the larger the value of the multiplier. After providing intuition for these results, we investigate the size of the multiplier in a dynamic, stochastic, general equilibrium model. In this model the multiplier effect is substantially larger than one when the zero bound binds. Our model is consistent with the behavior of key macro aggregates during the recent financial crisis.
BibTeX: @article{Christiano2011, author = {Christiano, Lawrence and Eichenbaum, Martin and Rebelo, Sergio}, title = {When Is the Government Spending Multiplier Large?}, journal = {Journal of Political Economy}, publisher = {JSTOR}, year = {2011}, volume = {119}, number = {1}, pages = {78--121}, url = {http://www.jstor.org/stable/10.1086/659312} }
Chung, H., Davig, T. and Leeper, E.M.	Monetary and Fiscal Policy Switching [Abstract] [BibTeX]	2007	Journal of Money, Credit and Banking Vol. 39(4), pp. 809-842	article	URL
Abstract: A growing body of evidence finds that policy reaction functions vary substantially over different periods in the United States. This paper explores how moving to an environment in which monetary and fiscal regimes evolve according to a Markov process can change the impacts of policy shocks. In one regime monetary policy follows the Taylor principle and taxes rise strongly with debt; in another regime the Taylor principle fails to hold and taxes are exogenous. An example shows that a unique bounded non-Ricardian equilibrium exists in this environment. A computational model illustrates that because agents' decision rules embed the probability that policies will change in the future, monetary and tax shocks always produce wealth effects. When it is possible that fiscal policy will be unresponsive to debt at times, active monetary policy (like a Taylor rule) in one regime is not sufficient to insulate the economy against tax shocks in that regime and it can have the unintended consequence of amplifying and propagating the aggregate demand effects of tax shocks. The paper also considers the implications of policy switching for two empirical issues.
BibTeX: @article{Chung2007, author = {Hess Chung and Troy Davig and Eric M. Leeper}, title = {Monetary and Fiscal Policy Switching}, journal = {Journal of Money, Credit and Banking}, year = {2007}, volume = {39}, number = {4}, pages = {809-842}, url = {http://www.blackwell-synergy.com/doi/abs/10.1111/j.1538-4616.2007.00047.x} }
Cimadomo, J.	Fiscal Policy in Real Time [Abstract] [BibTeX]	2012	Scandinavian Journal of Economics Vol. 114(2), pp. 440-465	article	URL
Abstract: In this paper we argue that any assessment on the intentional stance of fiscal policy should be based upon all the information available to policymakers at the time of fiscal planning. In particular, real-time data on the discretionary fiscal policy "instrument", the structural primary balance, should be used in the estimation of fiscal policy reaction functions. In fact, the ex-post realization of discretionary fiscal measures may end up to be drastically different from what intentionally planned by fiscal authorities in the budget law. If this is the case, and if revision errors in the policy indicator are correlated with the ones in the regressors, it is shown that commonly used estimators become biased possibly inducing a misleading judgement on the policy stance. We derive the functional form of that bias and, based on empirical second-order moments, we are able to accurately predict the potential impact of using revised data in the evaluation of the ex-ante stance of fiscal policy. When fiscal policy rules are estimated on real-time data, our results indicate a counter-cyclical stance in OECD countries, especially during economic expansions. This contrasts with conventional findings based on revised data, which point to fiscal policy acyclicality or pro-cyclicality, and with Forni and Momigliano (2005) who employ real-time data for the output gap and find countercyclicality, but just in recessions. Further, we test whether threshold effects might be at play in the reaction of fiscal policy to the economic cycle and to debt accumulation. It emerges that the intentional cyclical behavior of fiscal policy is characterized by two regimes, and that the switch between them is likely to occur when output is close to its equilibrium level. On the other hand, the use of revised data does not allow to identify any threshold effect.
BibTeX: @article{Cimadomo2012a, author = {Jacopo Cimadomo}, title = {Fiscal Policy in Real Time}, journal = {Scandinavian Journal of Economics}, year = {2012}, volume = {114}, number = {2}, pages = {440-465}, url = {http://onlinelibrary.wiley.com/doi/10.1111/j.1467-9442.2012.01697.x/abstract} }
Cimadomo, J., Hauptmeier, S. and Zimmermann, T.	Fiscal consolidations and bank balance sheets [Abstract] [BibTeX]	2014	Journal of International Money and Finance Vol. 45(C), pp. 74-90	article	URL
Abstract: We empirically investigate the effects of fiscal policy on bank balance sheets, focusing on episodes of fiscal consolidation. To this aim, we employ a very large data set of individual banks' balance sheets, combined with a newly compiled data set on fiscal consolidations. We find that standard capital adequacy ratios such as the Tier-1 ratio tend to improve following episodes of fiscal consolidation: for the median bank in our sample, a 1% of GDP fiscal consolidation increases the Tier-1 capital ratio by around 1.5 percentage points over two years. Our results suggest that this improvement results from a portfolio re-balancing from private to public debt securities which reduces the risk-weighted value of assets. In fact, if fiscal adjustment efforts are perceived as structural policy changes that improve the sustainability of public finances and, therefore, reduce credit risk, the banks' demand for government securities should increase relative to other assets.
BibTeX: @article{Cimadomo2014, author = {Cimadomo, Jacopo and Hauptmeier, Sebastian and Zimmermann, Tom}, title = {Fiscal consolidations and bank balance sheets}, journal = {Journal of International Money and Finance}, year = {2014}, volume = {45}, number = {C}, pages = {74-90}, url = {http://www.sciencedirect.com/science/article/pii/S0261560614000321} }
Cimadomo, J.	Real-Time Data And Fiscal Policy Analysis: A Survey Of The Literature [Abstract] [BibTeX]	2016	Journal of Economic Surveys Vol. 30(2), pp. 302-326	article	URL
Abstract: This paper surveys the empirical research on fiscal policy analysis based on real-time data. This literature can be broadly divided in three groups that focus on: (1) the statistical properties of revisions in fiscal data; (2) the political and institutional determinants of projection errors by governments and (3) the reaction of fiscal policies to the business cycle. It emerges that, first, fiscal data revisions are large and initial releases are biased estimates of final values. Second, the presence of strong fiscal rules and institutions leads to relatively more accurate releases of fiscal data and small deviations of fiscal outcomes from government plans. Third, the cyclical stance of fiscal policies is estimated to be more "counter-cyclical" when real-time data are used instead of ex-post data. Finally, more work is needed for the development of real-time datasets for fiscal policy analysis. In particular, a comprehensive real-time dataset including fiscal variables for industrialized (and possibly developing) countries, published and maintained by central banks or other institutions, is still missing. JEL Classification: E62, H60, H68
BibTeX: @article{Cimadomo2016, author = {Jacopo Cimadomo}, title = {Real-Time Data And Fiscal Policy Analysis: A Survey Of The Literature}, journal = {Journal of Economic Surveys}, year = {2016}, volume = {30}, number = {2}, pages = {302-326}, url = {http://onlinelibrary.wiley.com/doi/10.1111/joes.2016.30.issue-2/issuetoc} }
Cloyne, J.	Discretionary tax changes and the macroeconomy: new narrative evidence from the United Kingdom [Abstract] [BibTeX]	2013	American Economic Review Vol. 103(4), pp. 1507-1528	article	URL
Abstract: This paper provides new estimates of the macroeconomic effects of tax changes using a new narrative dataset for the United Kingdom. Identification is achieved by isolating "exogenous" tax policy changes using the Romer and Romer narrative strategy. I find that a 1 percent cut in taxes increases GDP by 0.6 percent on impact and 2.5 percent over three years. The findings are remarkably similar to Romer and Romer narrative estimates for the United States, reinforcing the view that tax changes have powerful and persistent effects. "Exogenous" tax changes are also shown to have contributed to important episodes in the UK business cycle.
BibTeX: @article{Cloyne2013, author = {Cloyne, James}, title = {Discretionary tax changes and the macroeconomy: new narrative evidence from the United Kingdom}, journal = {American Economic Review}, publisher = {American Economic Association}, year = {2013}, volume = {103}, number = {4}, pages = {1507--1528}, url = {http://www.ingentaconnect.com/content/aea/aer/2013/00000103/00000004/art00015} }
Coenen, G. and Straub, R.	Does government spending crowd in private consumption? Theory and empirical evidence for the euro area [Abstract] [BibTeX]	2005	International Finance Vol. 8(3), pp. 435-470	article	URL
Abstract: In this paper, we revisit the effects of government spending shocks on private consumption which have been at centre stage of the macroeconomic policy debate for quite a long time. We conduct our analysis in an estimated model of the euro area, which is representative of a new generation of dynamic stochastic general equilibrium (DSGE) models usable for quantitative policy analysis. We show that the inclusion of non-Ricardian households, which simply consume their current disposable income, is in general conducive to raising the level of consumption in response to government spending shocks when compared with a benchmark specification without non-Ricardian households. However, we find that there is only a fairly small chance that government spending shocks crowd in consumption, mainly because the estimated share of non-Ricardian households is relatively low, but also because of the large negative wealth effect induced by the highly persistent nature of government spending shocks.
BibTeX: @article{Coenen2005, author = {Coenen, Günter and Straub, Roland}, title = {Does government spending crowd in private consumption? Theory and empirical evidence for the euro area}, journal = {International Finance}, publisher = {Wiley Online Library}, year = {2005}, volume = {8}, number = {3}, pages = {435--470}, url = {http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2362.2005.00166.x/abstract} }
Coenen, G., Mohr, M. and Straub, R.	Fiscal consolidation in the euro area: Long-run benefits and short-run costs [BibTeX]	2008	Economic Modelling Vol. 25(5), pp. 912-932	article	URL
BibTeX: @article{Coenen2008, author = {Coenen, Günter and Mohr, Matthias and Straub, Roland}, title = {Fiscal consolidation in the euro area: Long-run benefits and short-run costs}, journal = {Economic Modelling}, publisher = {Elsevier}, year = {2008}, volume = {25}, number = {5}, pages = {912--932}, url = {http://www.sciencedirect.com/science/article/pii/S0264999307001435} }
Coenen, G., Erceg, C.J., Freedman, C., Furceri, D., Kumhof, M., Lalonde, R., Laxton, D., Lindé, J., Mourougane, A., Muir, D., Mursula, S. and d , C.	Effects of Fiscal Stimulus in Structural Models [Abstract] [BibTeX]	2012	American Economic Journal: Macroeconomics Vol. 4(1), pp. 22-68	article	URL
Abstract: The paper subjects seven structural DSGE models, all used heavily by policymaking institutions, to discretionary fiscal stimulus shocks using seven different fiscal instruments, and compares the results to those of two prominent academic DSGE models. There is considerable agreement across models on both the absolute and relative sizes of different types of fiscal multipliers. The size of many multipliers is large, particularly for spending and targeted transfers. Fiscal policy is most effective if it has moderate persistence and if monetary policy is accommodative. Permanently higher spending or deficits imply significantly lower initial multipliers. (JEL E12, E13, E52, E62)
BibTeX: @article{Coenen2012, author = {Günter Coenen and Christopher J. Erceg and Charles Freedman and Davide Furceri and Michael Kumhof and René Lalonde and Douglas Laxton and Jesper Lindé and Annabelle Mourougane and Dirk Muir and Susanna Mursula and Carlos d}, title = {Effects of Fiscal Stimulus in Structural Models}, journal = {American Economic Journal: Macroeconomics}, year = {2012}, volume = {4}, number = {1}, pages = {22-68}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/mac.4.1.22} }
Cogan, J.F., Cwik, T., Taylor, J.B. and Wieland, V.	New Keynesian versus old Keynesian government spending multipliers [Abstract] [BibTeX]	2010	Journal of Economic Dynamics and Control Vol. 34(3), pp. 281-295	article	URL
Abstract: Renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy. Because of modelling uncertainty, it is essential that policy evaluations be robust to alternative assumptions. We find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust. Government spending multipliers in an alternative empirically estimated and widely cited new Keynesian model are much smaller than in these old Keynesian models; the estimated stimulus is extremely small with GDP and employment effects only one-sixth as large and with private sector employment impacts likely to be even smaller. We investigate the sensitivity of our findings with regard to the response of monetary policy, the zero bound on nominal interest rates and the inclusion of an empirically relevant degree of rule-of-thumb behaviour in the new Keynesian model. In addition, we relate our findings using estimated structural macroeconomic models to the recent literature using reduced-form regression techniques.
BibTeX: @article{Cogan2010, author = {Cogan, John F. and Cwik, Tobias and Taylor, John B. and Wieland, Volker}, title = {New Keynesian versus old Keynesian government spending multipliers}, journal = {Journal of Economic Dynamics and Control}, year = {2010}, volume = {34}, number = {3}, pages = {281-295}, url = {http://www.sciencedirect.com/science/article/pii/S0165188910000114} }
Cogan, J.F., Taylor, J.B., Wieland, V. and Wolters, M.H.	Fiscal consolidation strategy [Abstract] [BibTeX]	2013	Journal of Economic Dynamics and Control Vol. 37(2), pp. 404-421	article	URL
Abstract: In the aftermath of the global financial crisis and great recession, many countries face substantial deficits and growing debts. In the United States, federal government outlays as a ratio to GDP rose substantially from about 19.5 percent before the crisis to over 24 percent after the crisis. In this paper we consider a fiscal consolidation strategy that brings the budget to balance by gradually reducing this spending ratio over time to the level that prevailed prior to the crisis. A crucial issue is the impact of such a consolidation strategy on the economy. We use structural macroeconomic models to estimate this impact focussing primarily on a dynamic stochastic general equilibrium model with price and wage rigidities and adjustment costs. We separate out the impact of reductions in government purchases and transfers, and we allow for a reduction in both distortionary taxes and government debt relative to the baseline of no consolidation. According to the model simulations GDP rises in the short run upon announcement and implementation of this fiscal consolidation strategy and remains higher than the baseline in the long run. We explore the role of the mix of expenditure cuts and tax reductions as well as gradualism in achieving this policy outcome. Finally, we conduct sensitivity studies regarding the type of model used and its parameterization.
BibTeX: @article{Cogan2013a, author = {Cogan, John F and Taylor, John B and Wieland, Volker and Wolters, Maik H}, title = {Fiscal consolidation strategy}, journal = {Journal of Economic Dynamics and Control}, publisher = {Elsevier}, year = {2013}, volume = {37}, number = {2}, pages = {404--421}, url = {http://www.sciencedirect.com/science/article/pii/S0165188912002023} }
Corsetti, G. and Roubini, N.	Politically Motivated Fiscal Deficits: Policy Issues in Closed and Open Economies [Abstract] [BibTeX]	1997	Economics and Politics Vol. 9(1), pp. 27-54	article	URL
Abstract: In this paper we reconsider the trade-off between rules and discretion in fiscal policy in the presence of politically motivated fiscal deficits. We present a model of political bias in the budget process appropriately developed to allow for tax-smoothing-motivated deficits as well as for the consideration of deficit biases in open economies. We find that endowing politically-biased governments with the ability to respond to economic shocks with deficit finance will not exacerbate the existing biases. In an open economy, the ability to borrow abroad will significantly increase the deficit. However, restrictions to public foreign borrowing will not reduce the political bias as long as the private sector has access to international capital markets at the same terms as the government.
BibTeX: @article{Corsetti1997, author = {Giancarlo Corsetti and Nouriel Roubini}, title = {Politically Motivated Fiscal Deficits: Policy Issues in Closed and Open Economies}, journal = {Economics and Politics}, year = {1997}, volume = {9}, number = {1}, pages = {27-54}, url = {http://onlinelibrary.wiley.com/doi/10.1111/1468-0343.00018/full} }
Corsetti, G., Meier, A. and Müller, G.J.	Cross-Border Spillovers from Fiscal Stimulus [Abstract] [BibTeX]	2010	International Journal of Central Banking Vol. 6(1), pp. 5-37	article	URL
Abstract: The global recession of 2008-09 has revived interest in the international repercussions of domestic policy choices. This paper focuses on the case of fiscal stimulus, investigating cross-border spillovers from an increase in exhaustive government spending on the basis of a two-country business-cycle model. Our model allows spillovers to be affected by a range of features, including trade elasticities, the size and openness of economies, and financial imperfections. Beyond these well-known determinants, however, we highlight the central importance of policy frameworks, notably the medium-term debt consolidation regime. We consider the plausible case in which a temporary debt-financed increase in government spending gives rise to higher future taxes along with some reduction in spending over time. The anticipated spending reversal not only strengthens the domestic stimulus effect but also enhances positive cross-border spillovers through its impact on global long-term interest rates. Thus, our findings lend support to the notion that coordinated short-term stimulus policies are most effective when coupled with credible medium-term consolidation plans featuring at least some spending restraint.
BibTeX: @article{Corsetti2010, author = {Giancarlo Corsetti and André Meier and Gernot J. Müller}, title = {Cross-Border Spillovers from Fiscal Stimulus}, journal = {International Journal of Central Banking}, year = {2010}, volume = {6}, number = {1}, pages = {5-37}, url = {http://www.ijcb.org/journal/ijcb10q1a1.pdf} }
Corsetti, G., Kuester, K., Meier, A. and Müller, G.J.	Debt Consolidation and Fiscal Stabilization of Deep Recessions [Abstract] [BibTeX]	2010	American Economic Review Vol. 100(2), pp. 41-45	article	URL
Abstract: The global financial crisis of 2008-09 has sent public debt on sharply higher trajectories. With the economic recovery gradually taking hold, the focus is now shifting to fiscal "exit" strategies. Medium-term consolidation efforts are likely to include not only tax increases but also sizeable spending cuts. Our paper uses a standard new Keynesian model to show that the anticipation of such medium-term spending cuts generally enhances the expansionary effect of short-run fiscal stimulus. This conclusion still applies when monetary policy is constrained by the zero lower bound on policy rates. In this case, however, the reversal of government spending must not occur too early on the recovery path, or at least must be suitably gradual.
BibTeX: @article{Corsetti2010a, author = {Giancarlo Corsetti and Keith Kuester and André Meier and Gernot J. Müller}, title = {Debt Consolidation and Fiscal Stabilization of Deep Recessions}, journal = {American Economic Review}, year = {2010}, volume = {100}, number = {2}, pages = {41-45}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.100.2.41} }
Corsetti, G., Meier, A. and Müller, G.J.	Fiscal stimulus with spending reversals [Abstract] [BibTeX]	2012	Review of Economics and Statistics Vol. 94(4), pp. 878-895	article	URL
Abstract: The short-run effects of fiscal policy depend not only on current tax and spending choices, but also on expectations about future policy adjustment. While general equilibrium models typically restrict medium-term adjustment to taxation, we highlight the importance of government spending dynamics. First, we provide time series evidence for the United States suggesting that an exogenous increase in government spending prompts a rise in public debt, followed over time by a reduction in spending below trend. Second, we show how expected spending reversals alter the short-run impact of fiscal policy in a new Keynesian model, bringing it closer in line with the evidence.
BibTeX: @article{Corsetti2012, author = {Corsetti, Giancarlo and Meier, André and Müller, Gernot J}, title = {Fiscal stimulus with spending reversals}, journal = {Review of Economics and Statistics}, publisher = {MIT Press}, year = {2012}, volume = {94}, number = {4}, pages = {878--895}, url = {http://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00233#.V5DFMO_6zQo} }
Corsetti, G., Meier, A. and Müller, G.J.	What determines government spending multipliers? [Abstract] [BibTeX]	2012	Economic Policy Vol. 27(72), pp. 521-565	article	URL
Abstract: This paper studies how the effects of government spending vary with the economic environment. Using a panel of OECD countries, we identify fiscal shocks as residuals from an estimated spending rule and trace their macroeconomic impact under different conditions regarding the exchange rate regime, public indebtedness, and health of the financial system. The unconditional responses to a positive spending shock broadly confirm earlier findings. However, conditional responses differ systematically across exchange rate regimes, as real appreciation and external deficits occur mainly under currency pegs. We also find output and consumption multipliers to be unusually high during times of financial crisis.
BibTeX: @article{Corsetti2012a, author = {Corsetti, Giancarlo and Meier, André and Müller, Gernot J}, title = {What determines government spending multipliers?}, journal = {Economic Policy}, year = {2012}, volume = {27}, number = {72}, pages = {521-565}, url = {http://economicpolicy.oxfordjournals.org/content/27/72/521} }
Corsetti, G., Kuester, K., Meier, A. and Muller, G.J.	Sovereign Risk, Fiscal Policy, and Macroeconomic Stability [Abstract] [BibTeX]	2013	Economic Journal Vol. 0, pp. F99-F132	article	URL
Abstract: This paper analyzes the impact of strained government finances on macroeconomic stability and the transmission of fiscal policy. Using a variant of the model by Curdia and Woodford (2009), we study a 'sovereign risk channel' through which sovereign default risk raises funding costs in the private sector. If monetary policy is constrained, the sovereign risk channel exacerbates indeterminacy problems: private-sector beliefs of a weakening economy may become self-fulfilling. In addition, sovereign risk amplifies the effects of negative cyclical shocks. Under those conditions, fiscal retrenchment can help curtail the risk of macroeconomic instability and, in extreme cases, even stimulate economic activity.
BibTeX: @article{Corsetti2013, author = {Giancarlo Corsetti and Keith Kuester and André Meier and Gernot J. Muller}, title = {Sovereign Risk, Fiscal Policy, and Macroeconomic Stability}, journal = {Economic Journal}, year = {2013}, volume = {0}, pages = {F99-F132}, url = {http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12013/full} }
de Cos, P.H. and Moral-Benito, E.	Fiscal Consolidations and Economic Growth [Abstract] [BibTeX]	2013	Fiscal Studies Vol. 34, pp. 491-515	article	URL
Abstract: The aim of this paper is to deepen the understanding of the macroeconomic consequences of fiscal consolidations. In particular, there is evidence in the literature of fiscal consolidation episodes producing (non-Keynesian) expansionary effects in the short run. We replicate this result for a panel of OECD countries under exogeneity of the fiscal consolidation. However, we provide some evidence that output growth might affect the fiscal tightening process so that fiscal consolidations are not exogenous to economic growth. Once we allow for feedback effects from economic growth to fiscal adjustments, we find that expansionary effects disappear and recover the typical Keynesian effect of fiscal adjustments. This finding points to the need to take these short-term negative implications into account in the design of fiscal consolidations.
BibTeX: @article{Cos2013, author = {Pablo Hernández de Cos and Enrique Moral-Benito}, title = {Fiscal Consolidations and Economic Growth}, journal = {Fiscal Studies}, year = {2013}, volume = {34}, pages = {491-515}, url = {http://onlinelibrary.wiley.com/doi/10.1111/j.1475-5890.2013.12017.x/full} }
de Cos, P.H. and Moral-Benito, E.	What drives a successful fiscal consolidation? [Abstract] [BibTeX]	2013	Applied Economics Letters Vol. 20(8), pp. 748-753	article	URL
Abstract: Fiscal consolidations are currently in the agenda of fiscal authorities in many countries. Using Bayesian Model Averaging to overcome the problem of model uncertainty, we find that growth-enhancing policies and cuts in public wages are the most appropriate ingredients for successfully reducing debt levels and budget deficits.
BibTeX: @article{Cos2013b, author = {Pablo Hernández de Cos and Enrique Moral-Benito}, title = {What drives a successful fiscal consolidation?}, journal = {Applied Economics Letters}, year = {2013}, volume = {20}, number = {8}, pages = {748-753}, url = {http://hdl.handle.net/10.1080/13504851.2012.741672} }
de Cos, P.H. and Moral-Benito, E.	Fiscal multipliers in turbulent times: the case of Spain [Abstract] [BibTeX]	2016	Empirical Economics Vol. 50(4), pp. 1589-1625	article	URL
Abstract: Abstract What are the output responses to fiscal policy? Although important contributions have been made in the literature, quantifying the size of the fiscal multiplier remains a challenge. Indeed, the challenge of estimating a unique fiscal multiplier is probably an ill-posed one. The magnitude of the multiplier may well depend on country- and time-specific characteristics of the fiscal stance under scrutiny. In this paper, we estimate state-specific multipliers for Spain depending on the state of the economy along several dimensions. The government spending multiplier is estimated to be larger during recessions and banking stress periods, but much smaller (or even negative) during periods of weak public finances. Combining these three dimensions into a single global turmoil indicator via principal component analysis, the estimated multipliers are 1.4 for crisis (or turbulent) times and 0.6 for tranquil times.
BibTeX: @article{Cos2016, author = {Pablo Hernández de Cos and Enrique Moral-Benito}, title = {Fiscal multipliers in turbulent times: the case of Spain}, journal = {Empirical Economics}, year = {2016}, volume = {50}, number = {4}, pages = {1589-1625}, url = {http://link.springer.com/10.1007/s00181-015-0969-0} }
Cournéde, B., Goujard, A. and Pina, À.	Reconciling fiscal consolidation with growth and equity [Abstract] [BibTeX]	2013	OECD Journal: Economic Studies Vol. 2013(1), pp. 7-89	article	URL
Abstract: Despite sustained efforts made in recent years to rein in budget deficits, a majority of OECD countries still face substantial public finance consolidation needs. While essential to avoid the disruption and large costs ultimately associated with unsustainable public finances, fiscal consolidation complicates the task of achieving other policy goals. In most cases, it weighs on demand in the short term. And, if too little attention is paid to the mix of instruments used to achieve consolidation, it can undermine long-term growth, exacerbate income inequality and slow the process of global rebalancing. It is therefore important for governments to adopt consolidation strategies that minimise these adverse side-effects. The analysis proposes consolidation strategies that take into account other policy goals as well as country-specific circumstances and preferences. To do so, increases in particular taxes and cuts in specific spending areas are assessed for their effects on short- and long-term growth, income distribution and external accounts. The results of detailed illustrative simulations indicate that a significant number of OECD countries may have to raise harmful taxes or cut valuable spending areas to deliver sufficient consolidation, underscoring the need for structural reforms to counteract these side-effects. The results are robust to an extensive range of sensitivity checks.
BibTeX: @article{Cournede2013a, author = {Boris Cournéde and Antoine Goujard and Àlvaro Pina}, title = {Reconciling fiscal consolidation with growth and equity}, journal = {OECD Journal: Economic Studies}, year = {2013}, volume = {2013}, number = {1}, pages = {7-89}, url = {http://dx.doi.org/10.1787/eco_studies-2013-5jzb44vzbkhd} }
Coutinho, P.M. and Silva, L.A.	Time-varying fiscal policy in the US [Abstract] [BibTeX]	2014	Studies in Nonlinear Dynamics & Econometrics Vol. 18(2), pp. 28	article	URL
Abstract: To investigate time heterogeneity in the effects of fiscal policy in the US, we use a non-recursive, Blanchard and Perotti-like structural VAR with time-varying parameters, estimated through Bayesian simulation over 1965:2-2009:2. Our evidence suggests that fiscal policy has lost some capacity to stimulate output but this trend is more pronounced for taxes net of transfers than for government expenditure, whose effectiveness declines only slightly. Fiscal multipliers keep conventional signs throughout. An investigation of changes in fiscal policy conduct indicates an increase in the countercyclical responsiveness of net taxes over recent decades, which appears to have reached a maximum during the 2008-2009 recession.
BibTeX: @article{Coutinho2014, author = {Pereira Manuel Coutinho and Lopes Artur Silva}, title = {Time-varying fiscal policy in the US}, journal = {Studies in Nonlinear Dynamics & Econometrics}, year = {2014}, volume = {18}, number = {2}, pages = {28}, url = {http://www.degruyter.com/view/j/snde.2014.18.issue-2/snde-2012-0062/snde-2012-0062.xml?format=INT} }
Croce, M.M., Kung, H., Nguyen, T.T. and Schmid, L.	Fiscal policies and asset prices [Abstract] [BibTeX]	2012	Review of Financial Studies Vol. 25(9), pp. 2635-2672	article	URL
Abstract: The surge in public debt triggered by the financial crisis has raised uncertainty about future tax pressure and economic activity. We examine the asset pricing effects of fiscal policies in a production-based general equilibrium model in which taxation affects corporate decisions by: (1) distorting profits and investment; (2) reducing the cost of debt through a tax shield; and (3) depressing productivity growth. In settings with recursive preferences, these three tax-based channels generate sizable risk premia, making tax uncertainty a first-order concern. We document further that corporate tax smoothing can substantially alter the effects of public expenditure shocks.
BibTeX: @article{Croce2012, author = {Croce, M Max and Kung, Howard and Nguyen, Thien T and Schmid, Lukas}, title = {Fiscal policies and asset prices}, journal = {Review of Financial Studies}, publisher = {Soc Financial Studies}, year = {2012}, volume = {25}, number = {9}, pages = {2635--2672}, url = {http://rfs.oxfordjournals.org/content/25/9/2635.short} }
Croce, M.M., Nguyen, T.T. and Schmid, L.	The market price of fiscal uncertainty [Abstract] [BibTeX]	2012	Journal of Monetary Economics Vol. 59(5), pp. 401 - 416	article	URL
Abstract: Recent fiscal interventions have raised concerns about US\ public debt, future distortionary tax pressure, and long-run growth potential. We explore the long-run implications of public financing policies aimed at short-run stabilization when: (i) agents are sensitive to model uncertainty, as in Hansen and Sargent (2007), and (ii) growth is endogenous, as in Romer (1990). We find that countercyclical deficit policies promoting short-run stabilization reduce the price of model uncertainty at the cost of significantly increasing the amount of long-run risk. Ultimately these tax policies depress innovation and long-run growth and may produce welfare losses.
BibTeX: @article{Croce2012a, author = {Mariano M. Croce and Thien T. Nguyen and Lukas Schmid}, title = {The market price of fiscal uncertainty}, journal = {Journal of Monetary Economics}, year = {2012}, volume = {59}, number = {5}, pages = {401 - 416}, note = {Carnegie-NYU-Rochester Conference Series on Public Policy - Robust Macroeconomic Policy at Carnegie Mellon University on November 11-12, 2011}, url = {http://www.sciencedirect.com/science/article/pii/S0304393212000554} }
Cwik, T. and Wieland, V.	Keynesian government spending multipliers and spillovers in the euro area [Abstract] [BibTeX]	2011	Economic Policy Vol. 26(67), pp. 493-549	article	URL
Abstract: The global financial crisis has lead to a renewed interest in discretionary fiscal stimulus. Advocates of discretionary measures emphasize that government spending can stimulate additional private spending --- the so-called Keynesian multiplier effect. Thus, we investigate whether the discretionary spending announced by Euro area governments for 2009 and 2010 is likely to boost euro area GDP by more than one for one. Because of modeling uncertainty, it is essential that such policy evaluations be robust to alternative modeling assumptions and different parameterizations. Therefore, we use five different empirical macroeconomic models with Keynesian features such as price and wage rigidities to evaluate the impact of fiscal stimulus. Four of them suggest that the planned increase in government spending will reduce private spending for consumption and investment purposes significantly. If announced government expenditures are implemented with delay the initial effect on euro area GDP, when stimulus is most needed, may even be negative. Traditional Keynesian multiplier effects only arise in a model that ignores the forward-looking behavioral response of consumers and firms. Using a multi-country model, we find that spillovers between euro area countries are negligible or even negative, because direct demand effects are offset by the indirect effect of euro appreciation.
BibTeX: @article{Cwik2011, author = {Tobias Cwik and Volker Wieland}, title = {Keynesian government spending multipliers and spillovers in the euro area}, journal = {Economic Policy}, year = {2011}, volume = {26}, number = {67}, pages = {493-549}, url = {http://www.blackwellpublishing.com/journal.asp?ref=0266-4658} }
De Cos, P.H. and Moral-Benito, E.	On the predictability of narrative fiscal adjustments [Abstract] [BibTeX]	2016	Economics Letters Vol. 143, pp. 69-72	article	URL
Abstract: This paper shows that spending-based adjustments identified by DeVries et al. (2011) can be predicted on the basis of past output growth and other macroeconomic variables. Moreover, their contractionary effects vanish once we account for this source of endogeneity while tax-based consolidations remain contractionary.
BibTeX: @article{DeCos2016, author = {De Cos, Pablo Hernández and Moral-Benito, Enrique}, title = {On the predictability of narrative fiscal adjustments}, journal = {Economics Letters}, publisher = {Elsevier}, year = {2016}, volume = {143}, pages = {69--72}, url = {http://www.sciencedirect.com/science/article/pii/S0165176516300969} }
Dell' Erba, S., Mattina, T. and Roitman, A.	Pressure or prudence? Tales of market pressure and fiscal adjustment [Abstract] [BibTeX]	2015	Journal of International Money and Finance Vol. 51(C), pp. 196-213	article	URL
Abstract: We study whether multiyear fiscal adjustment plans in 17 OECD countries during 1980-2011 have been associated with market pressure. We find that only a fraction of the consolidations occurred under market pressure, suggesting that market pressure is important but not the main element associated with consolidation plans. Many adjustments under market pressure were also clustered around external shocks, and entailed larger median fiscal adjustments than other multiyear consolidations. In contrast, we find that virtually all multiyear consolidations aimed at reducing budget deficits occurred with initially weak macro-fiscal fundamentals.
BibTeX: @article{DellErba2015, author = {Dell' Erba, Salvatore and Mattina, Todd and Roitman, Agustin}, title = {Pressure or prudence? Tales of market pressure and fiscal adjustment}, journal = {Journal of International Money and Finance}, year = {2015}, volume = {51}, number = {C}, pages = {196-213}, url = {http://www.sciencedirect.com/science/article/pii/S0261560614001909} }
DeLong, J.B. and Summers, L.H.	Fiscal Policy in a Depressed Economy [Abstract] [BibTeX]	2012	Brookings Papers on Economic Activity Vol. 44(1 (Spring), pp. 233-297	article	URL
Abstract: In a depressed economy, with short-term nominal interest rates at their zero lower bound, ample cyclical unemployment, and excess capacity, increased government purchases would be neither offset by the monetary authority raising interest rates nor neutralized by supply-side bottlenecks. Then even a small amount of hysteresis—even a small shadow cast on future potential output by the cyclical downturn—means, by simple arithmetic, that expansionary fiscal policy is likely to be self-financing. Even if it is not, it is highly likely to pass the sensible benefit-cost test of raising the present value of future potential output. Thus, at the zero bound, where the central bank cannot or will not but in any event does not perform its full role in stabilization policy, fiscal policy has the stabilization policy mission that others have convincingly argued it lacks in normal times. Whereas many economists have assumed that the path of potential output is invariant to even a deep and prolonged downturn, the available evidence raises a strong fear that hysteresis is indeed a factor. Although nothing in our analysis calls into question the importance of sustainable fiscal policies, it strongly suggests the need for caution regarding the pace of fiscal consolidation.
BibTeX: @article{DeLong2012, author = {J. Bradford DeLong and Lawrence H. Summers}, title = {Fiscal Policy in a Depressed Economy}, journal = {Brookings Papers on Economic Activity}, year = {2012}, volume = {44}, number = {1 (Spring}, pages = {233-297}, url = {http://larrysummers.com/wp-content/uploads/2012/10/2012_spring_BPEA_delongsummers.pdf} }
Drautzburg, T. and Uhlig, H.	Fiscal Stimulus and Distortionary Taxation [Abstract] [BibTeX]	2015	Review of Economic Dynamics Vol. 18(4), pp. 894-920	article	URL
Abstract: We quantify the fiscal multipliers in response to the American Recovery and Reinvestment Act (ARRA) of 2009. We extend the benchmark medium-scale New Keynesian model, allowing for credit-constrained households, the zero lower bound, government capital, and distortionary taxation. The posterior yields modestly positive short-run multipliers around 0.53 and modestly negative long-run multipliers around -0.36. We compare and relate recent literature multiplier calculations to ours. We explain the central empirical findings with the help of a simple three equation New Keynesian model with sticky wages and credit-constrained households.
BibTeX: @article{Drautzburg2015, author = {Thorsten Drautzburg and Harald Uhlig}, title = {Fiscal Stimulus and Distortionary Taxation}, journal = {Review of Economic Dynamics}, year = {2015}, volume = {18}, number = {4}, pages = {894-920}, url = {http://www.sciencedirect.com/science/article/pii/S1094202515000575} }
Dury, K. and Pina, A.M.	Fiscal policy in EMU: simulating the operation of the Stability Pact [Abstract] [BibTeX]	2003	Journal of Policy Modeling Vol. 25(2), pp. 179-206	article	URL
Abstract: We study the prospective operation of the Stability Pact by stochastic simulation. Using a forward-looking multi-country macroeconometric model, NiGEM, comprising individual blocks for 10 Euroland economies, the Pact's provisions are formalized in detail, and alternative monetary and fiscal rules are compared.
BibTeX: @article{Dury2003, author = {Dury, Karen and Pina, Alvaro M.}, title = {Fiscal policy in EMU: simulating the operation of the Stability Pact}, journal = {Journal of Policy Modeling}, year = {2003}, volume = {25}, number = {2}, pages = {179-206}, url = {http://www.sciencedirect.com/science/article/pii/S0161-8938(02)00205-3} }
Erceg, C.J., Guerrieri, L. and Gust, C.	Expansionary Fiscal Shocks and the US Trade Deficit [Abstract] [BibTeX]	2005	International Finance Vol. 8(3), pp. 363-397	article	URL
Abstract: In this paper, we use a dynamic general equilibrium model of an open economy to assess the quantitative effects of fiscal shocks on the trade balance in the United States. We examine the effects of two alternative fiscal shocks: a rise in government consumption, and a reduction in the labour income tax rate. Our salient finding is that a fiscal deficit has a relatively small effect on the US trade balance, irrespective of whether the source is a spending increase or tax cut. In our benchmark calibration, we find that a rise in the fiscal deficit of 1 percentage point of gross domestic product (GDP) induces the trade balance to deteriorate by 0.2 percentage point of GDP or less. Noticeably larger effects are only likely to be elicited under implausibly high values of the short-run trade price elasticity, or of the share of liquidity-constrained households in the economy. From a policy perspective, our analysis suggests that even reducing the current US fiscal deficit (of 3% of GDP) to zero would be unlikely to narrow the burgeoning US trade deficit significantly.
BibTeX: @article{Erceg2005, author = {Christopher J. Erceg and Luca Guerrieri and Christopher Gust}, title = {Expansionary Fiscal Shocks and the US Trade Deficit}, journal = {International Finance}, year = {2005}, volume = {8}, number = {3}, pages = {363-397}, url = {http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2362.2005.00164.x/abstract} }
Erceg, C.J. and Lindé, J.	Fiscal Consolidation in an Open Economy [Abstract] [BibTeX]	2012	American Economic Review Vol. 102(3), pp. 186-91	article	URL
Abstract: his paper uses a New Keynesian DSGE model of a small open economy to compare how the effects of fiscal consolidation differ depending on whether monetary policy is constrained by currency union membership or by the zero lower bound on policy rates. We show that there are important differences in the impact of fiscal shocks across these monetary regimes that depend both on the duration of the zero lower bound and on features that determine the responsiveness of inflation.
BibTeX: @article{Erceg2012, author = {Christopher J. Erceg and Jesper Lindé}, title = {Fiscal Consolidation in an Open Economy}, journal = {American Economic Review}, year = {2012}, volume = {102}, number = {3}, pages = {186-91}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.102.3.186} }
Erceg, C.J. and Lindé, J.	Fiscal consolidation in a currency union: Spending cuts vs. tax hikes [Abstract] [BibTeX]	2013	Journal of Economic Dynamics and Control Vol. 37(2), pp. 422-445	article	URL
Abstract: This paper uses a two country DSGE model to examine the effects of tax-based vs. expenditure-based fiscal consolidation in a currency union. We find three key results. First, given limited scope for monetary accommodation, tax-based consolidation tends to have smaller adverse effects on output than expenditure-based consolidation in the near-term, though is more costly in the longer-run. Second, a large expenditure-based consolidation may be counterproductive in the near-term if the zero lower bound is binding, reflecting that output losses rise at the margin. Third, a "mixed strategy" that combines a sharp but temporary rise in taxes with gradual spending cuts may be desirable in minimizing the output costs of fiscal consolidation.
BibTeX: @article{Erceg2013, author = {Erceg, Christopher J and Lindé, Jesper}, title = {Fiscal consolidation in a currency union: Spending cuts vs. tax hikes}, journal = {Journal of Economic Dynamics and Control}, publisher = {Elsevier}, year = {2013}, volume = {37}, number = {2}, pages = {422--445}, url = {http://www.sciencedirect.com/science/article/pii/S0165188912001960} }
Erceg, C. and Lindé, J.	Is There A Fiscal Free Lunch In A Liquidity Trap? [Abstract] [BibTeX]	2014	Journal of the European Economic Association Vol. 12(1), pp. 73-107	article	URL
Abstract: In this paper, we use a dynamic stochastic general equilibrium model to examine the effects of an expansion in government spending in a liquidity trap. If the liquidity trap is very prolonged, the spending multiplier can be much larger than in normal circumstances, and the budgetary costs minimal. However, given this fiscal free lunch, it is unclear why policymakers would want to limit the size of fiscal expansion. Our paper addresses this question in a model environment in which the duration of the liquidity trap is determined endogenously, and depends on the size of the fiscal stimulus. We show that even if the multiplier is high for small increases in government spending, it may decrease substantially at higher spending levels; thus, it is crucial to distinguish between the marginal and average responses of output and government debt.
BibTeX: @article{Erceg2014, author = {Christopher Erceg and Jesper Lindé}, title = {Is There A Fiscal Free Lunch In A Liquidity Trap?}, journal = {Journal of the European Economic Association}, year = {2014}, volume = {12}, number = {1}, pages = {73-107}, url = {http://hdl.handle.net/10.1111/jeea.12059} }
Eyraud, L. and Lusinyan, L.	Vertical fiscal imbalances and fiscal performance in advanced economies [Abstract] [BibTeX]	2013	Journal of Monetary Economics Vol. 60(5), pp. 571-587	article	URL
Abstract: The paper examines empirically, using a measure of "vertical fiscal imbalances" (VFI), the relationship between overall fiscal performance and the financing structure of subnational governments. It presents stylized facts regarding the size, evolution, and components of measured VFI using data from 28 OECD countries. On average, the general government fiscal balance is found to improve by 1 percent of GDP for each 10 percentage point reduction in VFI.
BibTeX: @article{Eyraud2013a, author = {Eyraud, Luc and Lusinyan, Lusine}, title = {Vertical fiscal imbalances and fiscal performance in advanced economies}, journal = {Journal of Monetary Economics}, year = {2013}, volume = {60}, number = {5}, pages = {571-587}, url = {http://www.sciencedirect.com/science/article/pii/S0304393213000615} }
Favero, C., Giavazzi, F. and Perego, J.	Country heterogeneity and the international evidence on the effects of fiscal policy [Abstract] [BibTeX]	2011	IMF Economic Review Vol. 59(4), pp. 652-682	article	URL
Abstract: This paper argues that the richer frequency and variety of fiscal policy shocks available in an international sample, which makes the use of this evidence attractive, should be analyzed recognizing the heterogeneity that exists across different countries. The main conclusion of the authors' empirical analysis is that the question "what is the fiscal policy multiplier" is an ill-posed one. There is no unconditional fiscal policy multiplier. The effect of fiscal policy on output is different depending on the different debt dynamics, the different degree of openness, and the different fiscal reaction functions across different countries. Such differences concern not only the size of the multiplier, but sometimes also its sign. There are many fiscal multipliers and an average fiscal multiplier is of very little use to describe the effect of exogenous shifts in fiscal policy on output.
BibTeX: @article{Favero2011, author = {Favero, Carlo and Giavazzi, Francesco and Perego, Jacopo}, title = {Country heterogeneity and the international evidence on the effects of fiscal policy}, journal = {IMF Economic Review}, publisher = {Nature Publishing Group}, year = {2011}, volume = {59}, number = {4}, pages = {652--682}, url = {http://link.springer.com/article/10.1057%2Fimfer.2011.25} }
Forni, L., Monteforte, L. and Sessa, L.	The general equilibrium effects of fiscal policy: Estimates for the Euro area [Abstract] [BibTeX]	2009	Journal of Public Economics Vol. 93(3-4), pp. 559-585	article	URL
Abstract: This paper describes a dynamic stochastic general equilibrium model featuring a fraction of non-Ricardian agents in order to estimate the effects of fiscal policy in the Euro area. The model takes into account distortionary taxation on labor and capital income and on consumption, while expenditures are broken down into purchases of goods and services, compensation of public employees and transfers to households. A newly computed quarterly data set of fiscal variables is used. Our results point to the prevalence of mild Keynesian effects of public expenditures. In particular, although innovations in fiscal policy variables tend to be rather persistent, government purchases of goods and services and compensations for public employees have small and short-lived expansionary effects on private consumption, while innovations in transfers to households show a slightly more sizeable and lasting effect. The effects are more significant on the revenue side: decreases in labor income and consumption tax rates have sizeable effects on consumption and output, while a reduction in capital income tax favors investment and output in the medium run. Finally our estimates suggest that fiscal policy variables contribute little to the cyclical variability of the main macro variables.
BibTeX: @article{Forni2009, author = {Forni, Lorenzo and Monteforte, Libero and Sessa, Luca}, title = {The general equilibrium effects of fiscal policy: Estimates for the Euro area}, journal = {Journal of Public Economics}, year = {2009}, volume = {93}, number = {3-4}, pages = {559-585}, url = {http://www.sciencedirect.com/science/article/pii/S0047272708001382} }
Forni, L., Gerali, A. and Pisani, M.	The macroeconomics of fiscal consolidations in euro area countries [Abstract] [BibTeX]	2010	Journal of Economic Dynamics and Control Vol. 34(9), pp. 1791-1812	article	URL
Abstract: We simulate a currency union dynamic general equilibrium model to assess the macroeconomic implications of permanently reducing the public debt-to-gross domestic product (GDP) ratio in euro area countries. We obtain the following results. First, tax distortions are quantitatively significant. Second, the best fiscal consolidation strategy is to permanently reduce both expenditures and tax rates. Third, under such a consolidation strategy the transition is generally not costly, as the GDP and investment would grow, while private consumption would not fall. Finally, spillovers to the rest of the euro area are generally expansionary.
BibTeX: @article{Forni2010, author = {Forni, Lorenzo and Gerali, Andrea and Pisani, Massimiliano}, title = {The macroeconomics of fiscal consolidations in euro area countries}, journal = {Journal of Economic Dynamics and Control}, year = {2010}, volume = {34}, number = {9}, pages = {1791-1812}, url = {http://www.sciencedirect.com/science/article/pii/S0165188910001478} }
Gechert, S.	What fiscal policy is most effective? A meta-regression analysis [Abstract] [BibTeX]	2015	Oxford Economic Papers Vol. 67(3), pp. 553-580	article	URL
Abstract: I apply a meta-regression analysis to a unique data set of 104 studies on multiplier effects to derive stylized facts and quantify the differing effectiveness of the composition of fiscal impulses, adjusted for study design characteristics. Public spending multipliers are close to 1 and about 0.3 to 0.4 units larger than tax and transfer multipliers. Public investment multipliers are even larger than those of spending in general by approximately 0.5 unit. Multipliers vary with study design, whose influence should be laid open when drawing policy conclusions. The analysis provides guidance concerning influential factors, their significance, and magnitude.
BibTeX: @article{Gechert2015, author = {Sebastian Gechert}, title = {What fiscal policy is most effective? A meta-regression analysis}, journal = {Oxford Economic Papers}, year = {2015}, volume = {67}, number = {3}, pages = {553-580}, url = {http://oep.oxfordjournals.org/content/67/3/553} }
Giavazzi, F., Jappelli, T. and Pagano, M.	Searching for non-linear effects of fiscal policy: Evidence from industrial and developing countries [Abstract] [BibTeX]	2000	European Economic Review Vol. 44(7), pp. 1259-1289	article	URL
Abstract: Several recent studies suggest that the response of national saving to fiscal policy may be non-linear. In this paper we use two data sets to search for the circumstances in which such non-linear responses may arise: a sample of OECD countries used in previous studies, and sample of developing countries, using more recent World Bank data. We find that in both samples non-linear effects tend to be associated with large and persistent fiscal impulses. In the OECD sample the non-linearity of the response is stronger for fiscal contractions than for expansions. An increase in net taxes has no effect on national saving during large fiscal contractions, while it has a positive effect in less pronounced contractions. High or rapidly growing public debt does not appear to be a good predictor of non-linear effects. In the World Bank sample of developing countries, non-linearities in the response national saving to fiscal policy are not limited to large fiscal contractions, and also tend to occur in periods in which debt is accumulating rapidly, regardless of its initial level.
BibTeX: @article{Giavazzi2000, author = {Giavazzi, Francesco and Jappelli, Tullio and Pagano, Marco}, title = {Searching for non-linear effects of fiscal policy: Evidence from industrial and developing countries}, journal = {European Economic Review}, year = {2000}, volume = {44}, number = {7}, pages = {1259-1289}, url = {http://www.sciencedirect.com/science/article/pii/S0014-2921(00)00038-6} }
Giavazzi, F., Jappelli, T., Pagano, M. and Benedetti, M.	Searching for Non-monotonic Effects of Fiscal Policy: New Evidence [Abstract] [BibTeX]	2005	Monetary and Economic Studies Vol. 23(S1), pp. 197-217	article	URL
Abstract: Data revisions and the availability of a longer sample offer the opportunity to reconsider empirical findings that suggest that in the OECD countries national saving responds non-monotonically to fiscal policy. The paper confirms that the circumstance most likely to give rise to a non-monotonic response of national saving to a fiscal impulse is a "large and persistent impulse" defined as one in which the full employment surplus, as a percentage of potential output, changes by at least 1.5 percentage points per year over a two-year period. This particular circumstance remains the only statistically significant one even when we allow for non-monotonic responses to arise when public debt is growing rapidly or interest rate spreads are widening. We find that non-monotonic responses are similar for fiscal contractions and expansions. In particular, an increase in net taxes has no effect on national saving during large fiscal contractions or expansions. For government consumption there is a large, albeit in some specifications less than complete, offset during expansions or contractions.
BibTeX: @article{Giavazzi2005, author = {Giavazzi, Francesco and Jappelli, Tullio and Pagano, Marco and Benedetti, Marina}, title = {Searching for Non-monotonic Effects of Fiscal Policy: New Evidence}, journal = {Monetary and Economic Studies}, year = {2005}, volume = {23}, number = {S1}, pages = {197-217}, url = {http://www.imes.boj.or.jp/research/papers/english/me23-s1-9.pdf} }
Giuliodori, M. and Beetsma, R.	On the relationship between fiscal plans in the European Union: An empirical analysis based on real-time data [Abstract] [BibTeX]	2008	Journal of Comparative Economics Vol. 36(2), pp. 221-242	article	URL
Abstract: We investigate the interdependence of fiscal policies, and in particular deficits, in the European Union using an empirical analysis based on real-time fiscal data. There are many potential reasons why fiscal policies could be interdependent, such as direct externalities due to cross-border public investments, yardstick competition, tax competition and peer pressure among governments. Real-time data allow us to investigate how available information is mapped into policymakers' plans, while revised data are generally affected by reactions to unexpected developments that have taken place after the plan was made. Controlling for a large set of relevant determinants of primary cyclically adjusted deficits, we find indeed evidence of fiscal policy interdependence. However, the interdependence is rather asymmetrically distributed: the fiscal plans of the large countries affect the fiscal plans of the small countries, but not vice versa. Journal of Comparative Economics 36 (2) (2008) 221-242.
BibTeX: @article{Giuliodori2008, author = {Giuliodori, Massimo and Beetsma, Roel}, title = {On the relationship between fiscal plans in the European Union: An empirical analysis based on real-time data}, journal = {Journal of Comparative Economics}, year = {2008}, volume = {36}, number = {2}, pages = {221-242}, url = {http://www.sciencedirect.com/science/article/pii/S0147-5967(07)00085-6} }
Guajardo, J., Leigh, D. and Pescatori, A.	Expansionary Austerity? International Evidence [Abstract] [BibTeX]	2014	Journal of the European Economic Association Vol. 12(4), pp. 949-968	article	URL
Abstract: This paper investigates the short-term effects of fiscal consolidation on economic activity in OECD economies. We examine contemporaneous policy documents to identify changes in fiscal policy motivated by a desire to reduce the budget deficit and not by responding to prospective economic conditions. Using this new dataset, our estimates suggest that fiscal consolidation has contractionary effects on private demand and GDP. By contrast, estimates based on conventional measures of the fiscal policy stance used in the literature support the expansionary fiscal contractions hypothesis but appear to be biased toward overstating expansionary effects.
BibTeX: @article{Guajardo2014, author = {Jaime Guajardo and Daniel Leigh and Andrea Pescatori}, title = {Expansionary Austerity? International Evidence}, journal = {Journal of the European Economic Association}, year = {2014}, volume = {12}, number = {4}, pages = {949-968}, url = {http://onlinelibrary.wiley.com/doi/10.1111/jeea.12083/abstract} }
Hall, R.E.	By How Much Does GDP Rise If the Government Buys More Output? [Abstract] [BibTeX]	2009	Brookings Papers on Economic Activity Vol. 40(2 (Fall)), pp. 183-249	article	URL
Abstract: During World War II and the Korean War, real GDP grew by about half the amount of the increase in government purchases. With allowance for other factors holding back GDP growth during those wars, the multiplier linking government purchases to GDP may be in the range of 0.7 to 1.0, a range generally supported by research based on vector autoregressions that control for other determinants, but higher values are not ruled out. New Keynesian macro models have multipliers in that range as well. On the other hand, neoclassical models have a much lower multiplier, because they predict that consumption falls when purchases rise. The key features of a model that delivers a higher multiplier are (1) the decline in the markup ratio of price over cost that occurs in those models when output rises, and (2) the elastic response of employment to an increase in demand. These features alone deliver a fairly high multiplier and they are complementary to another feature associated with Keynes, the linkage of consumption to current income. Multipliers are higher--perhaps around 1 .7--when the nominal interest rate is at its lower bound of zero, as it was during 2009.
BibTeX: @article{Hall2009, author = {Robert E. Hall}, title = {By How Much Does GDP Rise If the Government Buys More Output?}, journal = {Brookings Papers on Economic Activity}, year = {2009}, volume = {40}, number = {2 (Fall)}, pages = {183-249}, url = {https://www.brookings.edu/wp-content/uploads/2016/07/2009b_bpea_hall-1.pdf} }
Hall, R.E.	Fiscal Stability of High-Debt Nations under Volatile Economic Conditions [Abstract] [BibTeX]	2014	German Economic Review Vol. 15(1), pp. 4-22	article	URL
Abstract: Using a recursive empirical model of the real interest rate, GDP growth and the primary government deficit in the United States, I solve for the ergodic distribution of the debt/GDP ratio. If such a distribution exists, the government is satisfying its intertemporal budget constraint. One key finding is that historical fiscal policy would bring the current high-debt ratio back to its normal level of 0.35 over the coming decade. Forecasts of continuing increases in the ratio over the decade make the implicit assumption that fiscal policy has shifted dramatically. In the variant of the model that matches the forecast, the government would not satisfy its intertemporal budget constraint if the policy was permanent. The willingness of investors to hold US government debt implies a belief that the high-deficit policy is transitory.
BibTeX: @article{Hall2014, author = {Robert E. Hall}, title = {Fiscal Stability of High-Debt Nations under Volatile Economic Conditions}, journal = {German Economic Review}, year = {2014}, volume = {15}, number = {1}, pages = {4-22}, url = {http://onlinelibrary.wiley.com/doi/10.1111/geer.2014.15.issue-1/issuetoc;jsessionid=81599ADFF44B80354A1682C7C763FECE.f04t02} }
Hebous, S.	The Effects Of Discretionary Fiscal Policy On Macroeconomic Aggregates: A Reappraisal [Abstract] [BibTeX]	2011	Journal of Economic Surveys Vol. 25(4), pp. 674-707	article	URL
Abstract: Fiscal stimuli to recover? A cascade of academic and layman-articles debate the effectiveness of fiscal policy in stimulating the economy backed up by different economic models and empirical support. This essay surveys the theoretical predictions and recent empirical Vector Autoregression (VAR) evidence on the short-run effects of discretionary fiscal policy on macroeconomic aggregates.
BibTeX: @article{Hebous2011, author = {Shafik Hebous}, title = {The Effects Of Discretionary Fiscal Policy On Macroeconomic Aggregates: A Reappraisal}, journal = {Journal of Economic Surveys}, year = {2011}, volume = {25}, number = {4}, pages = {674-707}, url = {https://ideas.repec.org/a/bla/jecsur/v25y2011i4p674-707.html} }
Hebous, S. and Zimmermann, T.	Estimating the effects of coordinated fiscal actions in the euro area [Abstract] [BibTeX]	2013	European Economic Review Vol. 58(C), pp. 110-121	article	URL
Abstract: We estimate spillover effects of a fiscal shock in one member country in the euro area on outputs of the rest of the members, using a global vector autoregression (GVAR) model. We compare the effects of a domestic fiscal shock with those of a similar size area-wide shock expressed as a weighted average of the fiscal shocks across all member countries. According to our estimates, the impact of an area-wide fiscal shock on output of a member country tends to be positive and larger than that of a domestic shock. Since the cost of participating in the area-wide shock is lower than the cost of a similar size domestic shock, our finding indicates the importance of coordinated fiscal actions in the euro area.
BibTeX: @article{Hebous2013, author = {Hebous, Shafik and Zimmermann, Tom}, title = {Estimating the effects of coordinated fiscal actions in the euro area}, journal = {European Economic Review}, year = {2013}, volume = {58}, number = {C}, pages = {110-121}, url = {http://www.sciencedirect.com/science/article/pii/S0014292112001572} }
Jordà, Ò.	Estimation and inference of impulse responses by local projections [Abstract] [BibTeX]	2005	The American Economic Review Vol. 95(1), pp. 161-182	article	URL
Abstract: This paper introduces methods to compute impulse responses without specification and estimation of the underlying multivariate dynamic system. The central idea consists in estimating local projections at each period of interest rather than extrapolating into increasingly distant horizons from a given model, as it is done with vector autoregressions (VAR). The advantages of local projections are numerous: (1) they can be estimated by simple regression techniques with standard regression packages; (2) they are more robust to misspecification; (3) joint or point-wise analytic inference is simple; and (4) they easily accommodate experimentation with highly nonlinear and flexible specifications that may be impractical in a multivariate context. Therefore, these methods are a natural alternative to estimating impulse responses from VARs. Monte Carlo evidence and an application to a simple, closed-economy, new-Keynesian model clarify these numerous advantages.
BibTeX: @article{Jorda2005, author = {Òscar Jordà}, title = {Estimation and inference of impulse responses by local projections}, journal = {The American Economic Review}, publisher = {American Economic Association}, year = {2005}, volume = {95}, number = {1}, pages = {161--182}, url = {http://www.ingentaconnect.com/content/aea/aer/2005/00000095/00000001/art00008} }
Jordà, Ò. and Taylor, A.M.	The time for austerity: estimating the average treatment effect of fiscal policy [Abstract] [BibTeX]	2016	The Economic Journal Vol. 126(590), pp. 219-255	article	URL
Abstract: After the Global Financial Crisis, a controversial rush to fiscal austerity followed in many countries. Yet research on the effects of austerity on macroeconomic aggregates was and still is unsettled, mired by the difficulty of identifying multipliers from observational data. This article, reconciles seemingly disparate estimates of multipliers within a unified and state-contingent framework. We achieve identification of causal effects with new propensity-score based methods for time series data. Using this novel approach, we show that austerity is always a drag on growth, and especially so in depressed economies: a 1% of GDP fiscal consolidation translates into a loss of 3.5% of real GDP over five years when implemented in a slump, rather than just 1.8% in a boom.
BibTeX: @article{Jorda2016, author = {Jordà, Òscar and Taylor, Alan M}, title = {The time for austerity: estimating the average treatment effect of fiscal policy}, journal = {The Economic Journal}, publisher = {Wiley Online Library}, year = {2016}, volume = {126}, number = {590}, pages = {219--255}, url = {http://onlinelibrary.wiley.com/doi/10.1111/ecoj.12332/full} }
Jurado, K., Ludvigson, S.C. and Ng, S.	Measuring Uncertainty [Abstract] [BibTeX]	2015	American Economic Review Vol. 105(3), pp. 1177-1216	article	URL
Abstract: This paper exploits a data rich environment to provide direct econometric estimates of time-varying macroeconomic uncertainty. Our estimates display significant independent variations from popular uncertainty proxies, suggesting that much of the variation in the proxies is not driven by uncertainty. Quantitatively important uncertainty episodes appear far more infrequently than indicated by popular uncertainty proxies, but when they do occur, they are larger, more persistent, and are more correlated with real activity. Our estimates provide a benchmark to evaluate theories for which uncertainty shocks play a role in business cycles. (JEL C53, D81, E32, G12, G35, L25)
BibTeX: @article{Jurado2015, author = {Kyle Jurado and Sydney C. Ludvigson and Serena Ng}, title = {Measuring Uncertainty}, journal = {American Economic Review}, year = {2015}, volume = {105}, number = {3}, pages = {1177-1216}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.20131193} }
Koop, G., Pesaran, M.H. and Potter, S.M.	Impulse response analysis in nonlinear multivariate models [Abstract] [BibTeX]	1996	Journal of Econometrics Vol. 74(1), pp. 119-147	article	URL
Abstract: No abstract is available for this item.
BibTeX: @article{Koop1996, author = {Koop, Gary and Pesaran, M. Hashem and Potter, Simon M.}, title = {Impulse response analysis in nonlinear multivariate models}, journal = {Journal of Econometrics}, year = {1996}, volume = {74}, number = {1}, pages = {119-147}, url = {http://www.sciencedirect.com/science/article/pii/0304407694017174} }
Leeper, E.M., Walker, T.B. and Yang, S.-C.S.	Government investment and fiscal stimulus [Abstract] [BibTeX]	2010	Journal of Monetary Economics Vol. 57(8), pp. 1000-1012	article	URL
Abstract: Effects of government investment are studied in an estimated neoclassical growth model. The analysis focuses on two dimensions that are critical for understanding government investment as a fiscal stimulus: implementation delays for building public capital and expected fiscal adjustments to deficit-financed spending. Implementation delays can produce small or even negative labor and output responses to increases in government investment in the short run. Anticipated fiscal adjustments matter both quantitatively and qualitatively for long-run growth effects. When public capital is insufficiently productive, distorting financing can make government investment contractionary at longer horizons.
BibTeX: @article{Leeper2010, author = {Leeper, Eric M. and Walker, Todd B. and Yang, Shu-Chun S.}, title = {Government investment and fiscal stimulus}, journal = {Journal of Monetary Economics}, year = {2010}, volume = {57}, number = {8}, pages = {1000-1012}, url = {http://www.sciencedirect.com/science/article/pii/S0304393210001017} }
Leeper, E.M., Richter, A.W. and Walker, T.B.	Quantitative Effects of Fiscal Foresight [Abstract] [BibTeX]	2012	American Economic Journal: Economic Policy Vol. 4(2), pp. 115-44	article	URL
Abstract: Legislative and implementation lags imply that substantial time evolves between when news arrives about fiscal changes and when the changes actually take place - time when households and firms can adjust their behavior. We identify two types of fiscal news - government spending using the Survey of Professional Forecasters and taxes using the municipal bond market. The main contribution of the paper is a mapping from reduced-form estimates of news into a DSGE framework. We find that news about fiscal policy is a time-varying process and show that ignoring the time variation can have important consequences in a conventional macroeconomic model. (JEL E12, E62, H20, H30, H62)
BibTeX: @article{Leeper2012, author = {Eric M. Leeper and Alexander W. Richter and Todd B. Walker}, title = {Quantitative Effects of Fiscal Foresight}, journal = {American Economic Journal: Economic Policy}, year = {2012}, volume = {4}, number = {2}, pages = {115-44}, url = {https://www.aeaweb.org/articles?id=10.1257/pol.4.2.115} }
Leeper, E.M., Walker, T.B. and Yang, S.-C.S.	Fiscal Foresight and Information Flows [Abstract] [BibTeX]	2013	Econometrica Vol. 81(3), pp. 1115-1145	article	URL
Abstract: Fiscal foresight -- the phenomenon that legislative and implementation lags ensure that private agents receive clear signals about the tax rates they face in the future -- is intrinsic to the tax policy process. This paper develops an analytical framework to study the econometric implications of fiscal foresight. Simple theoretical examples show that foresight produces equilibrium time series with nonfundamental representations, which misalign the agents' and the econometrician's information sets. Economically meaningful shocks to taxes, therefore, cannot generally be extracted from statistical innovations in conventional ways. Econometric analyses that fail to align agents' and the econometrician's information sets can produce distorted inferences about the effects of tax policies. The paper documents the sensitivity of econometric inferences of tax effects to details about how tax information flows into the economy. We show that alternative assumptions about the information flows that give rise to fiscal foresight can reconcile the diverse empirical findings in the literature on anticipated tax changes.
BibTeX: @article{Leeper2013, author = {Eric M. Leeper and Todd B. Walker and Shu-Chun Susan Yang}, title = {Fiscal Foresight and Information Flows}, journal = {Econometrica}, year = {2013}, volume = {81}, number = {3}, pages = {1115-1145}, url = {http://onlinelibrary.wiley.com/doi/10.3982/ECTA8337/abstract;jsessionid=5DB37A029478BACE3580EA5F876745BA.f01t02} }
Mauro, P., Romeu, R., Binder, A. and Zaman, A.	A modern history of fiscal prudence and profligacy [Abstract] [BibTeX]	2015	Journal of Monetary Economics Vol. 76(C), pp. 55-70	article	URL
Abstract: Drawing on a newly collected historical dataset of fiscal stocks and flows, we analyze the determinants of variation, both across countries and over time, in how fiscal policy responds to increases in the government debt-to-GDP ratio. The fiscal data comprise revenues, primary expenditures, interest bill, and government debt for 55 countries for up to two hundred years. The policy response (increase in the primary fiscal balance in response to debt increases) is found to be significantly weaker when sovereign borrowing costs are low, inflation is high, and potential economic growth worsens unexpectedly. These results are robust to political factors.
BibTeX: @article{Mauro2015, author = {Mauro, Paolo and Romeu, Rafael and Binder, Ariel and Zaman, Asad}, title = {A modern history of fiscal prudence and profligacy}, journal = {Journal of Monetary Economics}, year = {2015}, volume = {76}, number = {C}, pages = {55-70}, url = {http://www.sciencedirect.com/science/article/pii/S0304393215000938} }
Mertens, K. and Ravn, M.	Measuring the Impact of Fiscal Policy in the Face of Anticipation: A Structural VAR Approach [Abstract] [BibTeX]	2010	Economic Journal Vol. 120(544), pp. 393-413	article	URL
Abstract: Empirical estimates of the impact of government spending shocks disagree on central issues such as the size of output multipliers and the responses of consumption and the real wage. One explanation for the disagreement is that fiscal shocks are often anticipated. Due to misspecification of the information set, anticipation effects may invalidate SVAR estimates of impulse responses. We use economic theory to derive a fiscal SVAR estimator that is applicable when fiscal shocks are anticipated. We study its properties and apply it to US data. We fail to find evidence that anticipation effects overturn the existing findings from the fiscal SVAR literature.
BibTeX: @article{Mertens2010, author = {Karel Mertens and MortenO. Ravn}, title = {Measuring the Impact of Fiscal Policy in the Face of Anticipation: A Structural VAR Approach}, journal = {Economic Journal}, year = {2010}, volume = {120}, number = {544}, pages = {393-413}, url = {http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2010.02361.x} }
Mertens, K. and Ravn, M.O.	Understanding the Aggregate Effects of Anticipated and Unanticipated Tax Policy Shocks [Abstract] [BibTeX]	2011	Review of Economic Dynamics Vol. 14(1), pp. 27-54	article	URL
Abstract: This paper evaluates the extent to which a DSGE model can account for the impact of tax policy shocks. We estimate the response of macroeconomic aggregates to anticipated and unanticipated tax shocks in the U.S. and find that unanticipated tax cuts have persistent expansionary effects on output, consumption, investment and hours worked. Anticipated tax cuts give rise to contractions in output, investment and hours worked prior to their implementation, while stimulating the economy when implemented. We show that a DSGE model can account quite successfully for these findings. The main features of the model are adjustment costs, consumption durables, variable capacity utilization and habit formation. (Copyright: Elsevier)
BibTeX: @article{Mertens2011, author = {Karel Mertens and Morten Overgaard Ravn}, title = {Understanding the Aggregate Effects of Anticipated and Unanticipated Tax Policy Shocks}, journal = {Review of Economic Dynamics}, year = {2011}, volume = {14}, number = {1}, pages = {27-54}, url = {http://dx.doi.org/10.1016/j.red.2010.07.004} }
Mertens, K. and Ravn, M.O.	Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated US Tax Policy Shocks [Abstract] [BibTeX]	2012	American Economic Journal: Economic Policy Vol. 4(2), pp. 145-81	article	URL
Abstract: We provide evidence on the dynamic effects of tax liability changes in the United States. We distinguish between surprise and anticipated tax changes. Preannounced but not yet implemented tax cuts give rise to contractions in output, investment, and hours worked while real wages increase. There are no significant anticipation effects on aggregate consumption. Implemented tax cuts, regardless of their timing, have expansionary effects, on output, consumption, investment, hours worked, and real wages. Results are shown to be robust. Tax shocks are important impulses to the US business cycle and anticipation effects have been important during several business cycle episodes. (JEL E23, E32, E62, H20, H30)
BibTeX: @article{Mertens2012, author = {Karel Mertens and Morten O. Ravn}, title = {Empirical Evidence on the Aggregate Effects of Anticipated and Unanticipated US Tax Policy Shocks}, journal = {American Economic Journal: Economic Policy}, year = {2012}, volume = {4}, number = {2}, pages = {145-81}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/pol.4.2.145} }
Mertens, K. and Ravn, M.O.	The dynamic effects of personal and corporate income tax changes in the United States [Abstract] [BibTeX]	2013	The American Economic Review Vol. 103(4), pp. 1212-1247	article	URL
Abstract: This paper estimates the dynamic effects of changes in taxes in the United States. We distinguish between changes in personal and corporate income taxes and develop a new narrative account of federal tax liability changes in these two tax components. We develop an estimator which uses narratively identified tax changes as proxies for structural tax shocks and apply it to quarterly post-WWII data. We find that short run output effects of tax shocks are large and that it is important to distinguish between different types of taxes when considering their impact on the labor market and on expenditure components.
BibTeX: @article{Mertens2013, author = {Mertens, Karel and Ravn, Morten O}, title = {The dynamic effects of personal and corporate income tax changes in the United States}, journal = {The American Economic Review}, publisher = {American Economic Association}, year = {2013}, volume = {103}, number = {4}, pages = {1212--1247}, url = {http://www.ingentaconnect.com/content/aea/aer/2013/00000103/00000004/art00005} }
Mertens, K. and Ravn, M.O.	A reconciliation of SVAR and narrative estimates of tax multipliers [Abstract] [BibTeX]	2014	Journal of Monetary Economics Vol. 68(S), pp. S1-S19	article	URL
Abstract: Existing empirical estimates of US nationwide tax multipliers vary from close to zero to very large. Using narrative measures as proxies for structural shocks to total tax revenues in an SVAR, we estimate tax multipliers at the higher end of the range: around two on impact and up to three after 6 quarters. We show that earlier findings of lower multipliers can be explained by an output elasticity of tax revenues assumption that is contradicted by empirical evidence or by failure to account for measurement error in narrative series of tax shocks.
BibTeX: @article{Mertens2014, author = {Mertens, Karel and Ravn, Morten O.}, title = {A reconciliation of SVAR and narrative estimates of tax multipliers}, journal = {Journal of Monetary Economics}, year = {2014}, volume = {68}, number = {S}, pages = {S1-S19}, url = {http://www.sciencedirect.com/science/article/pii/S0304393213000536} }
Mertens, K.R.S.M. and Ravn, M.O.	Fiscal Policy in an Expectations-Driven Liquidity Trap [Abstract] [BibTeX]	2014	Review of Economic Studies Vol. 81(4), pp. 1637-1667	article	URL
Abstract: We study the effects of fiscal policy interventions in a liquidity trap in a model with nominal rigidities and an interest rate rule. In a liquidity trap caused by a self-fulfilling state of low confidence, higher government spending has deflationary effects that reduce the spending multiplier when the zero lower bound is binding. Instead, cuts in marginal labour tax rates are inflationary and become more expansionary when the zero lower bound is binding. These findings contradict a popular view, based on a liquidity trap caused by a fundamental shock such as a taste shock, that higher government spending is inflationary and can therefore be associated with large multipliers at the zero lower bound, while lower marginal tax rates are deflationary and therefore counterproductive.
BibTeX: @article{Mertens2014a, author = {Karel R. S. M. Mertens and Morten O. Ravn}, title = {Fiscal Policy in an Expectations-Driven Liquidity Trap}, journal = {Review of Economic Studies}, year = {2014}, volume = {81}, number = {4}, pages = {1637-1667}, url = {http://hdl.handle.net/10.1093/restud/rdu016} }
Mountford, A. and Uhlig, H.	What are the effects of fiscal policy shocks? [Abstract] [BibTeX]	2009	Journal of applied econometrics Vol. 24(6), pp. 960-992	article	URL
Abstract: We propose and apply a new approach for analyzing the effects of fiscal policy using vector autoregressions. Specifically, we use sign restrictions to identify a government revenue shock as well as a government spending shock, while controlling for a generic business cycle shock and a monetary policy shock. We explicitly allow for the possibility of announcement effects, i.e., that a current fiscal policy shock changes fiscal policy variables in the future, but not at present. We construct the impulse responses to three linear combinations of these fiscal shocks, corresponding to the three scenarios of deficit-spending, deficit-financed tax cuts and a balanced budget spending expansion. We apply the method to US quarterly data from 1955 to 2000. We find that deficit-financed tax cuts work best among these three scenarios to improve GDP, with a maximal present value multiplier of five dollars of total additional GDP per each dollar of the total cut in government revenue 5 years after the shock.
BibTeX: @article{Mountford2009, author = {Mountford, Andrew and Uhlig, Harald}, title = {What are the effects of fiscal policy shocks?}, journal = {Journal of applied econometrics}, publisher = {Wiley Online Library}, year = {2009}, volume = {24}, number = {6}, pages = {960--992}, url = {http://onlinelibrary.wiley.com/doi/10.1002/jae.1079/abstract?userIsAuthenticated=false&deniedAccessCustomisedMessage=} }
Oecd	Fiscal consolidation: targets, plans and measures [Abstract] [BibTeX]	2011	OECD Journal on Budgeting Vol. 11(2), pp. 15-67	article	URL
Abstract: This chapter discusses OECD member countries� consolidation plans as of November/December 2010. The time frame for the plans ranges from 2009 to 2015. The chapter analyses current fiscal positions and announced fiscal strategies, consolidation plans, and the expenditure and revenue measures for 30 OECD member countries.
BibTeX: @article{Oecd2011, author = {Oecd}, title = {Fiscal consolidation: targets, plans and measures}, journal = {OECD Journal on Budgeting}, year = {2011}, volume = {11}, number = {2}, pages = {15-67}, url = {http://www.oecd-ilibrary.org/docserver/download/4211041ec003.pdf?expires=1469185060&id=id&accname=id13941&checksum=7B330A5EF3BD35BE897CB0A67B6A3610} }
Owyang, M.T., Ramey, V.A. and Zubairy, S.	Are government spending multipliers greater during periods of slack? Evidence from twentieth-century historical data [Abstract] [BibTeX]	2013	The American Economic Review Vol. 103(3), pp. 129-134	article	URL
Abstract: A key question that has arisen during recent debates is whether government spending multipliers are larger during times when resources are idle. This paper seeks to shed light on this question by analyzing new quarterly historical data covering multiple large wars and depressions in the United States and Canada. Using Jorda's (2005) method for estimating impulse responses, we find no evidence that multipliers are greater during periods of high unemployment in the United States. In every case, they are below unity. We do find evidence of higher multipliers during periods of slack in Canada, with some multipliers above unity.
BibTeX: @article{Owyang2013, author = {Owyang, Michael T and Ramey, Valerie A and Zubairy, Sarah}, title = {Are government spending multipliers greater during periods of slack? Evidence from twentieth-century historical data}, journal = {The American Economic Review}, publisher = {American Economic Association}, year = {2013}, volume = {103}, number = {3}, pages = {129--134}, url = {http://www.ingentaconnect.com/content/aea/aer/2013/00000103/00000003/art00019} }
Owyang, M.T. and Zubairy, S.	Who benefits from increased government spending? A state-level analysis [Abstract] [BibTeX]	2013	Regional Science and Urban Economics Vol. 43(3), pp. 445-464	article	URL
Abstract: We simultaneously identify two government spending shocks: military spending shocks as defined by Ramey (2011) and federal spending shocks as defined by Perotti (2008). We analyze the effect of these shocks on state-level personal income and employment. We find regional patterns in the manner in which both shocks affect state-level variables. Moreover, we find differences in the propagation mechanisms for military versus non-military spending shocks. The former benefits economies with larger manufacturing and retail sectors and states that receive military contracts. While non-military shocks also benefit states with the proper industrial mix, they appear to stimulate economic activity in lower-income states.
BibTeX: @article{Owyang2013a, author = {Owyang, Michael T. and Zubairy, Sarah}, title = {Who benefits from increased government spending? A state-level analysis}, journal = {Regional Science and Urban Economics}, year = {2013}, volume = {43}, number = {3}, pages = {445-464}, url = {http://www.sciencedirect.com/science/article/pii/S0166046213000203} }
Pain, N., Weale, M. and Young, G.	Britain's Fiscal Problems [Abstract] [BibTeX]	1997	Economic Journal Vol. 107(443), pp. 1142-56	article	URL
Abstract: Britain's public sector deficit in the 1990s has been much too large to allow the public sector to maintain its balance sheet position. In order to do this the current account deficit has to be reduced from its 1995/6 figure of 3 per cent of GDP to close to zero. Government plans show this being achieved by 1999/2000. A comparison of the current position with past behaviour shows that the deficit is unusually high, after due account is taken of the state of the economy and of electoral influences on the public finances. The high deficit is a consequence of unusually high spending rather than low taxation and the position has worsened since Britain left the ERM. The National Institute model allows us to compare with our base run a situation in which public finances evolve in line with past behaviour. This reduces consumption in the 1990s but raises it after 2000. An internal real rate of return of 3.85 per cent p.a. equates the current value of the two consumption paths. On the other hand the level of employment is considerably higher in the early stages of our base run and only slightly lower in the later stages.
BibTeX: @article{Pain1997, author = {Pain, Nigel and Weale, Martin and Young, Garry}, title = {Britain's Fiscal Problems}, journal = {Economic Journal}, year = {1997}, volume = {107}, number = {443}, pages = {1142-56}, url = {http://www.jstor.org/stable/2957856?seq=1#page_scan_tab_contents} }
Pappa, E., Sajedi, R. and Vella, E.	Fiscal consolidation with tax evasion and corruption [Abstract] [BibTeX]	2015	Journal of International Economics Vol. 96, Supplement 1, pp. S56 - S75	article	URL
Abstract: Cross-country evidence highlights the importance of tax evasion and corruption in determining the size of fiscal multipliers. We introduce these two features in a New Keynesian model and revisit the effects of fiscal consolidations. VAR evidence for Italy suggests that spending cuts reduce tax evasion, while tax hikes increase it. In the model, spending cuts induce a reallocation of production towards the formal sector, thus reducing tax evasion. Tax hikes increase the incentives to produce in the less productive shadow sector, implying higher output and unemployment losses. Corruption further amplifies these losses by requiring larger hikes in taxes to reduce debt. We use the model to assess the recent fiscal consolidation plans in Greece, Italy, Portugal and Spain. Our results corroborate the evidence of increasing levels of tax evasion during these consolidations and point to significant output and welfare losses, which could be reduced substantially by combating tax evasion and corruption.
BibTeX: @article{Pappa2015, author = {Evi Pappa and Rana Sajedi and Eugenia Vella}, title = {Fiscal consolidation with tax evasion and corruption}, journal = {Journal of International Economics}, year = {2015}, volume = {96, Supplement 1}, pages = {S56 - S75}, note = {37th Annual NBER\ International Seminar on Macroeconomics}, url = {http://www.sciencedirect.com/science/article/pii/S0022199614001494} }
Perotti, R.	Fiscal Consolidation in Europe: Composition Matters [Abstract] [BibTeX]	1996	American Economic Review Vol. 86(2), pp. 105-10	article	URL
Abstract: No abstract is available for this item.
BibTeX: @article{Perotti1996, author = {Perotti, Roberto}, title = {Fiscal Consolidation in Europe: Composition Matters}, journal = {American Economic Review}, year = {1996}, volume = {86}, number = {2}, pages = {105-10}, url = {http://www.jstor.org/stable/2118105?seq=1#page_scan_tab_contents} }
Perotti, R.	The Political Economy of Fiscal Consolidations [Abstract] [BibTeX]	1998	Scandinavian Journal of Economics Vol. 100(1), pp. 367-94	article	URL
Abstract: In the context of recent research in political economy, this paper addresses the policy problem of fiscal consolidation in terms of three types of issues: 1) the macroeconomic effects of alternative strategies to consolidate; 2) the institutional setups conducive to a consolidation; and 3) the best strategy for implementing a consolidation in order to maximize its political feasibility. One methodological feature of this survey is an emphasis on policy feasibility. One methodological feature of this survey is an emphasis on policy issues in order to bridge the gap between the level of abstraction of politico-economic models of fiscal policy and the issues faced by a policymaker when attempting a fiscal consolidation.
BibTeX: @article{Perotti1998, author = {Perotti, Roberto}, title = {The Political Economy of Fiscal Consolidations}, journal = {Scandinavian Journal of Economics}, year = {1998}, volume = {100}, number = {1}, pages = {367-94}, url = {http://onlinelibrary.wiley.com/doi/10.1111/1467-9442.00107/abstract} }
Pina, A.M.	Can Conservatism Be Counterproductive? Delegation and Fiscal Policy in a Monetary Union [Abstract] [BibTeX]	1999	Manchester School Vol. 67(0), pp. 88-115	article	URL
Abstract: This paper studies central bank independence in a model of a monetary union where fiscal policies remain the responsibility of national governments and generate externalities. Governments may either coordinate fiscal policy or not, and three forms of delegation are considered: Rogoff-type 'weight independence,' inflation targets and linear inflation contracts. The key results are as follows. Under fiscal coordination, 'conservatism' holds and targets (or contracts) out-perform 'weight independence.' Without fiscal coordination, 'anticonservatism' may be optimal when fiscal spillovers are negative, as it reduces governments' activism; and 'weight twenty' is restored, since it can alleviate distortions in shock stabilization. Copyright 1999 by Blackwell Publishers Ltd and The Victoria University of Manchester
BibTeX: @article{Pina1999, author = {Pina, Alvaro Manuel}, title = {Can Conservatism Be Counterproductive? Delegation and Fiscal Policy in a Monetary Union}, journal = {Manchester School}, year = {1999}, volume = {67}, number = {0}, pages = {88-115}, url = {http://onlinelibrary.wiley.com/doi/10.1111/1467-9957.67.s1.5/full} }
Pina, Á.M. and Venes, N.M.	The political economy of EDP fiscal forecasts: An empirical assessment [Abstract] [BibTeX]	2011	European Journal of Political Economy Vol. 27(3), pp. 534-546	article	URL
Abstract: We analyse the budget balance forecasts prepared by 15 European countries in their Excessive Deficit Procedure reportings, studying the statistical properties of forecast errors and their politico-institutional determinants. Forecast errors are responsive to growth surprises, fiscal institutions and opportunistic motivations: upcoming elections induce over-optimism, most apparent when the opposition wins, whereas commitment or mixed forms of fiscal governance and numerical expenditure rules (unlike deficit and debt rules) are associated to greater prudence. The main findings hold when using forecasts from national draft budgets. Taking subsamples reveals that opportunistic and institutional effects are only significant under the Stability and Growth Pact.
BibTeX: @article{Pina2011, author = {Pina, Álvaro M. and Venes, Nuno M.}, title = {The political economy of EDP fiscal forecasts: An empirical assessment}, journal = {European Journal of Political Economy}, year = {2011}, volume = {27}, number = {3}, pages = {534-546}, url = {http://www.sciencedirect.com/science/article/pii/S0176268011000164} }
Ramey, V.A.	Can Government Purchases Stimulate the Economy? [Abstract] [BibTeX]	2011	Journal of Economic Literature Vol. 49(3), pp. 673-85	article	URL
Abstract: This essay briefly reviews the state of knowledge about the government spending multiplier. Drawing on theoretical work, aggregate empirical estimates from the United States, as well as cross-locality estimates, I assess the likely range of multiplier values for the experiment most relevant to the stimulus package debate: a temporary, deficit-financed increase in government purchases. I conclude that the multiplier for this type of spending is probably between 0.8 and 1.5. ( JEL E23, E62, H50)
BibTeX: @article{Ramey2011, author = {Valerie A. Ramey}, title = {Can Government Purchases Stimulate the Economy?}, journal = {Journal of Economic Literature}, year = {2011}, volume = {49}, number = {3}, pages = {673-85}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/jel.49.3.673} }
Ramey, V.A.	Identifying Government Spending Shocks: It's all in the Timing [Abstract] [BibTeX]	2011	The Quarterly Journal of Economics Vol. 126(1), pp. 1-50	article	URL
Abstract: Standard vector autoregression (VAR) identification methods find that government spending raises consumption and real wages; the Ramey--Shapiro narrative approach finds the opposite. I show that a key difference in the approaches is the timing. Both professional forecasts and the narrative approach shocks Granger-cause the VAR shocks, implying that these shocks are missing the timing of the news. Motivated by the importance of measuring anticipations, I use a narrative method to construct richer government spending news variables from 1939 to 2008. The implied government spending multipliers range from 0.6 to 1.2.
BibTeX: @article{Ramey2011a, author = {Valerie A. Ramey}, title = {Identifying Government Spending Shocks: It's all in the Timing}, journal = {The Quarterly Journal of Economics}, year = {2011}, volume = {126}, number = {1}, pages = {1-50}, url = {http://qje.oxfordjournals.org/content/126/1/1.full.pdf+html} }
Ravn, M.O., Schmitt-Grohé, S. and Uribe, M.	Consumption, government spending, and the real exchange rate [Abstract] [BibTeX]	2012	Journal of Monetary Economics Vol. 59(3), pp. 215-234	article	URL
Abstract: Using panel structural VAR analysis and quarterly data from four industrialized countries, we document that an increase in government purchases raises output and private consumption, deteriorates the trade balance, and depreciates the real exchange rate. This pattern of comovement poses a puzzle for both neoclassical and Keynesian models. An explanation based on the deep-habit mechanism is proposed. An estimated two-country model with deep-habits is shown to replicate well the observed responses of output, consumption, and the trade balance, and the initial response of the real exchange rate to an estimated government spending shock.
BibTeX: @article{Ravn2012, author = {Ravn, Morten O. and Schmitt-Grohé, Stephanie and Uribe, Martín}, title = {Consumption, government spending, and the real exchange rate}, journal = {Journal of Monetary Economics}, year = {2012}, volume = {59}, number = {3}, pages = {215-234}, url = {http://www.sciencedirect.com/science/article/pii/S0304393212000219} }
Reinhart, C.M. and Rogoff, K.S.	Growth in a Time of Debt [Abstract] [BibTeX]	2010	American Economic Review Vol. 100(2), pp. 573-78	article	URL
Abstract: We study economic growth and inflation at different levels of government and external debt. Our analysis is based on new data on forty-four countries spanning about two hundred years. The dataset incorporates over 3,700 annual observations covering a wide range of political systems, institutions, exchange rate arrangements, and historic circumstances. Our main findings are: First, the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies. Second, emerging markets face lower thresholds for external debt (public and private) - which is usually denominated in a foreign currency. When external debt reaches 60 percent of GDP, annual growth declines by about two percent; for higher levels, growth rates are roughly cut in half. Third, there is no apparent contemporaneous link between inflation and public debt levels for the advanced countries as a group (some countries, such as the United States, have experienced higher inflation when debt/GDP is high.) The story is entirely different for emerging markets, where inflation rises sharply as debt increases.
BibTeX: @article{Reinhart2010, author = {Carmen M. Reinhart and Kenneth S. Rogoff}, title = {Growth in a Time of Debt}, journal = {American Economic Review}, year = {2010}, volume = {100}, number = {2}, pages = {573-78}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.100.2.573} }
Coenen, G., Straub, R. and Trabandt, M.	Fiscal Policy and the Great Recession in the Euro Area [Abstract] [BibTeX]	2012	American Economic Review Vol. 102(3), pp. 71-76	article	URL
Abstract: How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We estimate that discretionary fiscal measures have increased annualized quarterly real GDP growth during the crisis by up to 1.6 percentage points. We obtain our result by using an extended version of the European Central Bank's New Area-Wide Model with a rich specification of the fiscal sector. A detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result.
BibTeX: @article{RePEc:aea:aecrev:v:102:y:2012:i:3:p:71-76, author = {Gunter Coenen and Roland Straub and Mathias Trabandt}, title = {Fiscal Policy and the Great Recession in the Euro Area}, journal = {American Economic Review}, year = {2012}, volume = {102}, number = {3}, pages = {71-76}, url = {https://www.aeaweb.org/articles?id=10.1257/aer.102.3.71} }
Jappelli, T. and Pistaferri, L.	Fiscal Policy and MPC Heterogeneity [Abstract] [BibTeX]	2014	American Economic Journal: Macroeconomics Vol. 6(4), pp. 107-36	article	URL
Abstract: We use responses to survey questions in the 2010 Italian Survey of Household Income and Wealth that ask consumers how much of an unexpected transitory income change they would consume. The marginal propensity to consume (MPC) is 48 percent on average. We also find substantial heterogeneity in the distribution, as households with low cash-on-hand exhibit a much higher MPC than affluent households, which is in agreement with models with precautionary savings, where income risk plays an important role. The results have important implications for predicting household responses to tax reforms and redistributive policies.
BibTeX: @article{RePEc:aea:aejmac:v:6:y:2014:i:4:p:107-36, author = {Tullio Jappelli and Luigi Pistaferri}, title = {Fiscal Policy and MPC Heterogeneity}, journal = {American Economic Journal: Macroeconomics}, year = {2014}, volume = {6}, number = {4}, pages = {107-36}, url = {https://www.aeaweb.org/articles?id=10.1257/mac.6.4.107} }
Chahrour, R., Schmitt-Grohé, S. and Uribe, M.	A Model-Based Evaluation of the Debate on the Size of the Tax Multiplier [Abstract] [BibTeX]	2012	American Economic Journal: Economic Policy Vol. 4(2), pp. 28-45	article	URL
Abstract: The SVAR and narrative approaches to estimating tax multipliers deliver significantly different results. The former yields multipliers of about 1 and the latter of about 3. The two approaches differ along two important dimensions: the identification scheme and the reduced-form transmission mechanism. This paper uses a DSGE-model to evaluate the hypothesis that the difference in multipliers is due to differences in transmission mechanisms. The main finding of the paper is that this hypothesis is rejected. Instead, the observed differences in estimated multipliers are due either to the models failing to identify the same tax shock, or to small-sample uncertainty. (JEL E13, E23, E32, E62, H20)
BibTeX: @article{RePEc:aea:aejpol:v:4:y:2012:i:2:p:28-45, author = {Ryan Chahrour and Stephanie Schmitt-Grohé and Martín Uribe}, title = {A Model-Based Evaluation of the Debate on the Size of the Tax Multiplier}, journal = {American Economic Journal: Economic Policy}, year = {2012}, volume = {4}, number = {2}, pages = {28-45}, url = {https://www.aeaweb.org/articles?id=10.1257/pol.4.2.28} }
Melina, G. and Villa, S.	Fiscal Policy And Lending Relationships [Abstract] [BibTeX]	2014	Economic Inquiry Vol. 52(2), pp. 696-712	article	URL
Abstract: This paper studies how fiscal policy affects loan market conditions in the United States. First, it conducts a structural vector-autoregression analysis showing that the bank spread responds negatively to an expansionary government spending shock, while lending increases. Second, it illustrates that these results are mimicked by a dynamic stochastic general equilibrium model where the bank spread is endogenized via the inclusion of a banking sector exploiting lending relationships. Third, it shows that lending relationships represent a friction that generates a financial accelerator effect in the transmission of the fiscal shock. (JEL E44, E62)
BibTeX: @article{RePEc:bla:ecinqu:v:52:y:2014:i:2:p:696-712, author = {Giovanni Melina and Stefania Villa}, title = {Fiscal Policy And Lending Relationships}, journal = {Economic Inquiry}, year = {2014}, volume = {52}, number = {2}, pages = {696-712}, url = {http://onlinelibrary.wiley.com/doi/10.1111/ecin.12051/abstract} }
Leeper, E.M. and Walker, T.B.	Fiscal Limits in Advanced Economies [Abstract] [BibTeX]	2011	Economic Papers Vol. 30(1), pp. 33-47	article	URL
Abstract: Aging populations in advanced economies are placing ever-increasing demands on government spending in the form of old-age benefits. Economies that have promised substantially more benefits than they have made provision to finance are heading into a prolonged era of fiscal stress. Unresolved fiscal stress raises the possibility that the economies will hit their fiscal limits where taxes and spending no longer adjust to stabilize debt. In such economies, monetary policy may lose its ability to control inflation and influence the economy in the usual ways. The paper discusses models of fiscal limits and their implications and lays out a research agenda to integrate political economy and empirical considerations with general equilibrium models of monetary and fiscal interactions.
BibTeX: @article{RePEc:bla:econpa:v:30:y:2011:i:1:p:33-47, author = {Eric M. Leeper and Todd B. Walker}, title = {Fiscal Limits in Advanced Economies}, journal = {Economic Papers}, year = {2011}, volume = {30}, number = {1}, pages = {33-47}, url = {http://onlinelibrary.wiley.com/doi/10.1111/j.1759-3441.2011.00111.x/full} }
Fatás, A. and Mihov, I.	Why Fiscal Stimulus is Likely to Work [Abstract] [BibTeX]	2009	International Finance Vol. 12(1), pp. 57-73	article	URL
Abstract: We provide an overview of the effectiveness of fiscal policy actions by summarizing evidence from empirical and theoretical studies. Empirically, expansionary policy is found to have output multipliers greater than one. Given current economic conditions, we argue that the fiscal cost of not stabilizing the economy is likely to be much higher than the cost of a deficit that helps the economy go faster towards a recovery path.
BibTeX: @article{RePEc:bla:intfin:v:12:y:2009:i:1:p:57-73, author = {Antonio Fatás and Ilian Mihov}, title = {Why Fiscal Stimulus is Likely to Work}, journal = {International Finance}, year = {2009}, volume = {12}, number = {1}, pages = {57-73}, url = {http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2362.2009.01235.x/full} }
Cantore, C., Levine, P. and Melina, G.	A Fiscal Stimulus and Jobless Recovery [Abstract] [BibTeX]	2014	Scandinavian Journal of Economics Vol. 116(3), pp. 669-701	article	URL
Abstract: We analyze the effects of a government-spending expansion in a dynamic stochastic general equilibrium model with Mortensen–Pissarides labor-market frictions, deep habits in private and public consumption, investment adjustment costs, a constant elasticity of substitution (CES) production function, and adjustments in employment at both intensive and extensive margins. The combination of deep habits and CES technology is crucial. The presence of deep habits magnifies the responses of macroeconomic variables to a fiscal stimulus, while an elasticity of substitution between capital and labor in the range of available estimates allows the model to produce a scenario compatible with the observed jobless recovery.
BibTeX: @article{RePEc:bla:scandj:v:116:y:2014:i:3:p:669-701, author = {Cristiano Cantore and Paul Levine and Giovanni Melina}, title = {A Fiscal Stimulus and Jobless Recovery}, journal = {Scandinavian Journal of Economics}, year = {2014}, volume = {116}, number = {3}, pages = {669-701}, url = {http://onlinelibrary.wiley.com/doi/10.1111/sjoe.12066/abstract;jsessionid=ED9944F9BBF4EFBA90B894CE5AA263C9.f01t01} }
Antonio, F. and Ilian, M.	Fiscal Policy as a Stabilization Tool [Abstract] [BibTeX]	2012	The B.E. Journal of Macroeconomics Vol. 12(3), pp. 1-68	article	URL
Abstract: We analyze empirically the cyclical behavior of fiscal policy among a group of 23 OECD countries. We introduce a framework to capture the fiscal policy stance in a way that brings together automatic stabilizers and discretionary fiscal policy. We show that, for most countries, automatic changes in the budget balance play a stronger role in stabilizing output than discretionary fiscal policy. When compared across countries, changes in fiscal policy stance are predominantly linked to differences in government size. Tax revenues are close to being proportional to GDP and, combined with a relatively stable government spending, this leads to a countercyclical budget balance, which in turn helps stabilize aggregate demand. Furthermore, countries with less responsive automatic stabilizers, like the United States, tend to use countercyclical discretionary fiscal policy more aggressively. For all countries discretionary policy has become more aggressive in recent decades.
BibTeX: @article{RePEc:bpj:bejmac:v:12:y:2012:i:3:p:1-68:n:14, author = {Fatás Antonio and Mihov Ilian}, title = {Fiscal Policy as a Stabilization Tool}, journal = {The B.E. Journal of Macroeconomics}, year = {2012}, volume = {12}, number = {3}, pages = {1-68}, url = {https://www.degruyter.com/view/j/bejm.2012.12.issue-3/1935-1690.113/1935-1690.113.xml?format=INT} }
Fair Ray, C	Policy Effects in the Post Boom U.S. Economy [Abstract] [BibTeX]	2005	The B.E. Journal of Macroeconomics Vol. 5(1), pp. 1-31	article	URL
Abstract: The paper analyzes the question why the U.S. economy in the 2000:4--2004:3 period was sluggish in light of the large expansionary fiscal and monetary policies that took place. The answer does not appear to be that there were large structural changes in the economy or systematic bad shocks. This paper tests for such changes and shocks, and the results are generally negative. Instead, the main culprits seem to be large negative effects from declines in the stock market and exports. Although not tested in this paper, some of the decline in exports may be the result of the stock market decline, in which case most of the explanation is simply the stock market decline itself.
BibTeX: @article{RePEc:bpj:bejmac:v:topics.5:y:2005:i:1:n:19, author = {Fair Ray C}, title = {Policy Effects in the Post Boom U.S. Economy}, journal = {The B.E. Journal of Macroeconomics}, year = {2005}, volume = {5}, number = {1}, pages = {1-31}, url = {https://www.degruyter.com/view/j/bejm.2005.5.1/bejm.2005.5.1.1302/bejm.2005.5.1.1302.xml?format=INT} }
Fair, R.C.	The Sensitivity of Fiscal Policy Effects to Assumptions about the Behavior of the Federal Reserve [Abstract] [BibTeX]	1978	Econometrica Vol. 46(5), pp. 1165-79	article	URL
Abstract: The purpose of this paper is to examine within the context of a particular U.S. econometric model the sensitivity of fiscal policy effects to alternative assumptions about the behavior of the Federal Reserve. Five cases are considered, four in which Fed behavior is exogenous and one in which Fed behavior is endogenous. In each of the four exogenous cases the Fed is assumed to control a particular variable, which is then taken to be exogenous for purposes of the fiscal-policy experiments. For the endogenous case an estimated equation explaining Fed behavior is added to the model, and the expanded model is used to perform the experiments. The results of some optimal control experi ments are also reported in this paper. These latter experiments are designed to examine the sensitivity of optimal fiscal policies to alternative assumptions about Fed behavior. The main conclusion of this paper is that fiscal policy effects and optimal fiscal policies are quite sensitive to assumptions about the behavior of the Fed.
BibTeX: @article{RePEc:ecm:emetrp:v:46:y:1978:i:5:p:1165-79, author = {Fair, Ray C}, title = {The Sensitivity of Fiscal Policy Effects to Assumptions about the Behavior of the Federal Reserve}, journal = {Econometrica}, year = {1978}, volume = {46}, number = {5}, pages = {1165-79}, url = {http://www.jstor.org/stable/1911441} }
Fair, R.C.	Estimating the Uncertainty of Policy Effects in Nonlinear Models [Abstract] [BibTeX]	1980	Econometrica Vol. 48(6), pp. 1381-91	article	URL
Abstract: A method is described in this paper for estimating, by means of stochastic simulation, the asymptotic variances of multipliers of nonlinear models. It is used to estimate the uncertainty of the results of eight policy experiments for a particular model.
BibTeX: @article{RePEc:ecm:emetrp:v:48:y:1980:i:6:p:1381-91, author = {Fair, Ray C}, title = {Estimating the Uncertainty of Policy Effects in Nonlinear Models}, journal = {Econometrica}, year = {1980}, volume = {48}, number = {6}, pages = {1381-91}, url = {http://www.jstor.org/stable/1912813} }
Coenen, G., Straub, R. and Trabandt, M.	Gauging the effects of fiscal stimulus packages in the euro area [Abstract] [BibTeX]	2013	Journal of Economic Dynamics and Control Vol. 37(2), pp. 367-386	article	URL
Abstract: We seek to quantify the impact on euro area GDP of the European Economic Recovery Plan (EERP) enacted in response to the financial crisis of 2008–2009. To do so, we estimate an extended version of the ECB's New Area-Wide Model with a richly specified fiscal sector. The estimation results point to the existence of important complementarities between private and government consumption and, to a lesser extent, between private and public capital. We first examine the implied present-value multipliers for seven distinct fiscal instruments and show that the estimated complementarities result in fiscal multipliers larger than one for government consumption and investment. We highlight the importance of monetary accommodation for these findings. We then show that the EERP, if implemented as initially enacted, had a sizeable, although short-lived impact on euro area GDP. Since the EERP comprised both revenue and expenditure-based fiscal stimulus measures, the total multiplier is below unity.
BibTeX: @article{RePEc:eee:dyncon:v:37:y:2013:i:2:p:367-386, author = {Coenen, Günter and Straub, Roland and Trabandt, Mathias}, title = {Gauging the effects of fiscal stimulus packages in the euro area}, journal = {Journal of Economic Dynamics and Control}, year = {2013}, volume = {37}, number = {2}, pages = {367-386}, url = {http://www.sciencedirect.com/science/article/pii/S016518891200190X} }
Ben Zeev, N. and Pappa, E.	Multipliers of unexpected increases in defense spending: An empirical investigation [Abstract] [BibTeX]	2015	Journal of Economic Dynamics and Control Vol. 57(C), pp. 205-226	article	URL
Abstract: We show that unexpected increases in defense spending increase total factor productivity (TFP) and output and decrease investment in US quarterly data. Yet, the output multiplier is zero when the TFP response is shut down. We examine various explanations for this phenomenon and find that the rise in TFP is due to the presence of measurement error in quarterly data. Using artificial data generated from an RBC model with measurement error, we demonstrate the suitability of our identification approach for recovering the true output multiplier in the presence of measurement error.
BibTeX: @article{RePEc:eee:dyncon:v:57:y:2015:i:c:p:205-226, author = {Ben Zeev, Nadav and Pappa, Evi}, title = {Multipliers of unexpected increases in defense spending: An empirical investigation}, journal = {Journal of Economic Dynamics and Control}, year = {2015}, volume = {57}, number = {C}, pages = {205-226}, url = {http://www.sciencedirect.com/science/article/pii/S016518891500113X} }
Hollmayr, J. and Matthes, C.	Learning about fiscal policy and the effects of policy uncertainty [Abstract] [BibTeX]	2015	Journal of Economic Dynamics and Control Vol. 59(C), pp. 142-162	article	URL
Abstract: In this paper we ask how uncertainty about fiscal policy affects the impact of fiscal policy changes on the economy when the government tries to counteract a deep recession. The agents in our model are uncertain about the conduct of fiscal policy and act as econometricians by estimating fiscal policy rules that might change over time.
BibTeX: @article{RePEc:eee:dyncon:v:59:y:2015:i:c:p:142-162, author = {Hollmayr, Josef and Matthes, Christian}, title = {Learning about fiscal policy and the effects of policy uncertainty}, journal = {Journal of Economic Dynamics and Control}, year = {2015}, volume = {59}, number = {C}, pages = {142-162}, url = {http://www.sciencedirect.com/science/article/pii/S0165188915001505} }
Cuberes, D. and Mountford, A.	Fiscal policy institutions and history [Abstract] [BibTeX]	2012	Economics Letters Vol. 115(3), pp. 392-395	article	URL
Abstract: This paper shows that historical variables can explain a significant part of discretionary government spending across countries. We argue that these results provide evidence in favor of Besley and Persson’s (2009) hypothesis that institutional quality or state capacity is historically determined and further that institutional quality determines, in part, economic policy.
BibTeX: @article{RePEc:eee:ecolet:v:115:y:2012:i:3:p:392-395, author = {Cuberes, David and Mountford, Andrew}, title = {Fiscal policy institutions and history}, journal = {Economics Letters}, year = {2012}, volume = {115}, number = {3}, pages = {392-395}, url = {http://www.sciencedirect.com/science/article/pii/S0165176511005854} }
Cantore, C., Levine, P., Melina, G. and Yang, B.	A fiscal stimulus with deep habits and optimal monetary policy [Abstract] [BibTeX]	2012	Economics Letters Vol. 117(1), pp. 348-353	article	URL
Abstract: A New-Keynesian model with deep habits and optimal monetary policy delivers a larger-than-1 fiscal multiplier and consumption crowding in. Optimized Taylor-type rules dominate a conventional Taylor rule. Consumption is crowded out if the Taylor rule is suboptimal or if commitment is absent.
BibTeX: @article{RePEc:eee:ecolet:v:117:y:2012:i:1:p:348-353, author = {Cantore, Cristiano and Levine, Paul and Melina, Giovanni and Yang, Bo}, title = {A fiscal stimulus with deep habits and optimal monetary policy}, journal = {Economics Letters}, year = {2012}, volume = {117}, number = {1}, pages = {348-353}, url = {http://www.sciencedirect.com/science/article/pii/S0165176512003199} }
Colombo, V.	Economic policy uncertainty in the US: Does it matter for the Euro area? [Abstract] [BibTeX]	2013	Economics Letters Vol. 121(1), pp. 39-42	article	URL
Abstract: We investigate the effects of a US economic policy uncertainty shock on some Euro area macroeconomic aggregates via Structural VARs. We model the indicators of economic policy uncertainty recently developed by Baker et al. (2013) jointly with the aggregate price indexes and alternative indicators of the business cycle for the two above indicated economic areas. According to our SVARs, a one standard deviation shock to US economic policy uncertainty leads to a statistically significant fall in the European industrial production and prices of −0.12 % and −0.06 %, respectively. The contribution of the US uncertainty shock on the European aggregates is shown to be quantitatively larger than the one exerted by an Euro area-specific uncertainty shock.
BibTeX: @article{RePEc:eee:ecolet:v:121:y:2013:i:1:p:39-42, author = {Colombo, Valentina}, title = {Economic policy uncertainty in the US: Does it matter for the Euro area?}, journal = {Economics Letters}, year = {2013}, volume = {121}, number = {1}, pages = {39-42}, url = {http://www.sciencedirect.com/science/article/pii/S0165176513003066} }
Leeper, E.M., Plante, M. and Traum, N.	Dynamics of fiscal financing in the United States [Abstract] [BibTeX]	2010	Journal of Econometrics Vol. 156(2), pp. 304-321	article	URL
Abstract: General equilibrium models that include policy rules for government spending, lump-sum transfers, and distortionary taxation on labor and capital income and on consumption expenditures are fit to US data under rich specifications of fiscal policy rules to obtain several results. First, the best-fitting model allows many fiscal instruments to respond to debt. Second, responses of aggregates to fiscal policy shocks under rich rules vary considerably from responses where only non-distortionary fiscal instruments finance debt. Third, in the short run, all fiscal instruments except labor taxes react strongly to debt, but long-run intertemporal financing comes from all components of the government's budget constraint. Fourth, debt-financed fiscal shocks trigger long-lasting dynamics; short-run and long-run multipliers can differ markedly.
BibTeX: @article{RePEc:eee:econom:v:156:y:2010:i:2:p:304-321, author = {Leeper, Eric M. and Plante, Michael and Traum, Nora}, title = {Dynamics of fiscal financing in the United States}, journal = {Journal of Econometrics}, year = {2010}, volume = {156}, number = {2}, pages = {304-321}, url = {http://www.sciencedirect.com/science/article/pii/S0304-4076(09)00290-5} }
Davig, T. and Leeper, E.M.	Monetary-fiscal policy interactions and fiscal stimulus [Abstract] [BibTeX]	2011	European Economic Review Vol. 55(2), pp. 211-227	article	URL
Abstract: Increases in government spending trigger substitution effects--both inter- and intra-temporal--and a wealth effect. The ultimate impacts on the economy hinge on current and expected monetary and fiscal policy behavior. Studies that impose active monetary policy and passive fiscal policy typically find that government consumption crowds out private consumption: higher future taxes create a strong negative wealth effect, while the active monetary response increases the real interest rate. This paper estimates Markov-switching policy rules for the United States and finds that monetary and fiscal policies fluctuate between active and passive behavior. When the estimated joint policy process is imposed on a conventional new Keynesian model, government spending generates positive consumption multipliers in some policy regimes and in simulated data in which all policy regimes are realized. The paper reports the model's predictions of the macroeconomic impacts of the American Recovery and Reinvestment Act's implied path for government spending under alternative monetary-fiscal policy combinations.
BibTeX: @article{RePEc:eee:eecrev:v:55:y:2011:i:2:p:211-227, author = {Davig, Troy and Leeper, Eric M.}, title = {Monetary-fiscal policy interactions and fiscal stimulus}, journal = {European Economic Review}, year = {2011}, volume = {55}, number = {2}, pages = {211-227}, url = {http://www.sciencedirect.com/science/article/pii/S0014292110000450} }
Enders, Z., Müller, G.J. and Scholl, A.	How do fiscal and technology shocks affect real exchange rates?: New evidence for the United States [Abstract] [BibTeX]	2011	Journal of International Economics Vol. 83(1), pp. 53-69	article	URL
Abstract: Using vector autoregressions on U.S. time series relative to an aggregate of industrialized countries, this paper provides new evidence on the dynamic effects of government spending and technology shocks on the real exchange rate and the terms of trade. To achieve identification, we derive robust restrictions on the sign of several impulse responses from a two-country general equilibrium model. We find that both the real exchange rate and the terms of trade--whose responses are left unrestricted--depreciate in response to expansionary government spending shocks and appreciate in response to positive technology shocks.
BibTeX: @article{RePEc:eee:inecon:v:83:y:2011:i:1:p:53-69, author = {Enders, Zeno and Müller, Gernot J. and Scholl, Almuth}, title = {How do fiscal and technology shocks affect real exchange rates?: New evidence for the United States}, journal = {Journal of International Economics}, year = {2011}, volume = {83}, number = {1}, pages = {53-69}, url = {http://www.sciencedirect.com/science/article/pii/S0022-1996(10)00085-1} }
Reinhart, C.M., Reinhart, V. and Rogoff, K.	Dealing with debt [Abstract] [BibTeX]	2015	Journal of International Economics Vol. 96(S1), pp. S43-S55	article	URL
Abstract: This paper explores the menu of options for renormalizing public debt levels relative to nominal activity in the long run, should governments eventually decide to do so. Although debt ratios may need to rise further in some cases, a vision of longer-term options is key to weighing alternative medium-term stabilization strategies. Orthodox ones, the standard fare of officialdom, include enhancing growth, running primary budget surpluses, and privatizing government assets. Heterodox polices include restructuring debt contracts, generating unexpected inflation, taxing wealth, and repressing private finance. Advanced countries have relied far more on heterodox approaches than many observers choose to remember.
BibTeX: @article{RePEc:eee:inecon:v:96:y:2015:i:s1:p:s43-s55, author = {Reinhart, Carmen M. and Reinhart, Vincent and Rogoff, Kenneth}, title = {Dealing with debt}, journal = {Journal of International Economics}, year = {2015}, volume = {96}, number = {S1}, pages = {S43-S55}, url = {http://www.sciencedirect.com/science/article/pii/S0022199614001214} }
Burnside, C., Eichenbaum, M. and Fisher, J.D.M.	Fiscal shocks and their consequences [Abstract] [BibTeX]	2004	Journal of Economic Theory Vol. 115(1), pp. 89-117	article	URL
Abstract: This paper investigates the response of hours worked and real wages to fiscal policy shocks in the U.S. during the post World War II era. We identify these shocks with exogenous changes in military purchases and argue that they lead to a persistent increase in government purchases and tax rates on capital and labor income, and a persistent rise in aggregate hours worked as well as declines in real wages. The shocks are also associated with short lived rises in aggregate investment and small movements in private consumption. We describe and implement a methodology for assessing whether standard neoclassical models can account for the consequences of a fiscal policy shock. Simple versions of the neoclassical model can account for the qualitative effects of a fiscal shock. Once we allow for habit formation and investment adjustment costs, the model can also account reasonably well for the quantitative effects of a fiscal shock.
BibTeX: @article{RePEc:eee:jetheo:v:115:y:2004:i:1:p:89-117, author = {Burnside, Craig and Eichenbaum, Martin and Fisher, Jonas D. M.}, title = {Fiscal shocks and their consequences}, journal = {Journal of Economic Theory}, year = {2004}, volume = {115}, number = {1}, pages = {89-117}, url = {http://www.sciencedirect.com/science/article/pii/S0022053103002527} }
Baele, L., Bekaert, G., Cho, S., Inghelbrecht, K. and Moreno, A.	Macroeconomic regimes [Abstract] [BibTeX]	2015	Journal of Monetary Economics Vol. 70(C), pp. 51-71	article	URL
Abstract: A New-Keynesian macro-model is estimated accommodating regime-switching behavior in monetary policy and macro-shocks. A key to our estimation strategy is the use of survey-based expectations for inflation and output. Output and inflation shocks shift to the low volatility regime around 1985 and 1990, respectively. Monetary policy experiences multiple shifts with an important role in shaping macro-volatility. New estimates of the onset and demise of the Great Moderation are provided and the relative role played by macro-shocks and monetary policy is quantified. The estimated rational expectations model exhibits indeterminacy in the mean-square stability sense, mainly due to passive monetary policy.
BibTeX: @article{RePEc:eee:moneco:v:70:y:2015:i:c:p:51-71, author = {Baele, Lieven and Bekaert, Geert and Cho, Seonghoon and Inghelbrecht, Koen and Moreno, Antonio}, title = {Macroeconomic regimes}, journal = {Journal of Monetary Economics}, year = {2015}, volume = {70}, number = {C}, pages = {51-71}, url = {http://www.sciencedirect.com/science/article/pii/S0304393214001378} }
Gnocchi, S., Hauser, D. and Pappa, E.	Housework and fiscal expansions [Abstract] [BibTeX]	2016	Journal of Monetary Economics Vol. 79(C), pp. 94-108	article	URL
Abstract: In an otherwise-standard business cycle model with housework, calibrated consistently with data on time use, we discipline complementarity between consumption and hours worked and relate its strength to the size of fiscal multipliers. Evidence on the substitutability between home and market goods confirms that complementarity is an empirically relevant driver of fiscal multipliers. However, in a housework model substantial complementarity can be generated without imposing a low wealth effect, which contradicts the microeconomic evidence. Also, explicitly modeling housework matters for assessing the welfare effects of government spending, which are understated by theories that neglect substitutability between home-produced and market goods.
BibTeX: @article{RePEc:eee:moneco:v:79:y:2016:i:c:p:94-108, author = {Gnocchi, Stefano and Hauser, Daniela and Pappa, Evi}, title = {Housework and fiscal expansions}, journal = {Journal of Monetary Economics}, year = {2016}, volume = {79}, number = {C}, pages = {94-108}, url = {http://www.sciencedirect.com/science/article/pii/S0304393216300150} }
Fatas, A. and Mihov, I.	The macroeconomic effects of fiscal rules in the US states [Abstract] [BibTeX]	2006	Journal of Public Economics Vol. 90(1-2), pp. 101-117	article	URL
Abstract: Fiscal policy restrictions are often criticized for limiting the ability of governments to react to business cycle fluctuations. Therefore, the adoption of quantitative restrictions is viewed as inevitably leading to increased macroeconomic volatility. In this Paper we use data from 48 US states to investigate how budget rules affect fiscal policy outcomes. Our key findings are that (1) strict budgetary restrictions lead to lower policy volatility (i.e. less discretion in conducting fiscal policy); and (2) fiscal restrictions reduce the responsiveness of fiscal policy to output shocks and decrease the persistence of spending fluctuations. These two results should have opposite effects on output volatility. While less discretion should reduce volatility, less responsiveness of fiscal policy might amplify business cycle volatility. Our analysis shows that the first effect dominates and that restrictions on fiscal policy lead to less volatility in output.
BibTeX: @article{RePEc:eee:pubeco:v:90:y:2006:i:1-2:p:101-117, author = {Fatas, Antonio and Mihov, Ilian}, title = {The macroeconomic effects of fiscal rules in the US states}, journal = {Journal of Public Economics}, year = {2006}, volume = {90}, number = {1-2}, pages = {101-117}, url = {http://www.sciencedirect.com/science/article/pii/S0047272705000435} }
Eichenbaum, M. and Fisher, J.D.M.	Fiscal Policy in the Aftermath of 9/11 [Abstract] [BibTeX]	2005	Journal of Money, Credit and Banking Vol. 37(1), pp. 1-22	article	URL
Abstract: This paper investigates the nature of U.S. fiscal policy in the aftermath of 9/11. We argue that the recent declines in the government surplus and tax rates cannot be accounted for by either the state of the U.S. economy as of 9/11 or as the typical response of fiscal policy to a large exogenous rise in military expenditures. Our evidence suggests that, had tax rates responded in the way they "normally" do to a large fiscal shock, aggregate output would have been lower and the surplus would not have changed by much. Our results do not bear directly on the desirability of the decline in tax rates or the surplus after 9/11.
BibTeX: @article{RePEc:mcb:jmoncb:v:37:y:2005:i:1:p:1-22, author = {Eichenbaum, Martin and Fisher, Jonas D M}, title = {Fiscal Policy in the Aftermath of 9/11}, journal = {Journal of Money, Credit and Banking}, year = {2005}, volume = {37}, number = {1}, pages = {1-22}, url = {http://www.nber.org/papers/w10430.pdf} }
Leeper, E.M.	Anchoring fiscal expectations [Abstract] [BibTeX]	2009	Reserve Bank of New Zealand Bulletin Vol. 72, pp. 17-42	article	URL
Abstract: This paper draws on a lecture on 12 November 2008 in Wellington, when the author was a Professorial Fellow in Monetary and Financial Economics at Victoria University and the Reserve Bank of New Zealand.Leeper argues that there are remarkable parallels between how monetary and fiscal policies operate on the macro economy and that these parallels are sufficient to lead us to think about transforming fiscal policy and fiscal institutions as many countries have transformed monetary policy and monetary institutions. Making fiscal transparency comparable to monetary transparency requires fiscal authorities to discuss future possible fiscal policies explicitly. Enhanced fiscal transparency can help anchor expectations of fiscal policy and make fiscal actions more predictable and effective. As advanced economies move into a prolonged period of heightened fiscal activity, anchoring fiscal expectations will become an increasingly important aspect of macroeconomic policy.
BibTeX: @article{RePEc:nzb:nzbbul:sept2009:3, author = {Eric M. Leeper}, title = {Anchoring fiscal expectations}, journal = {Reserve Bank of New Zealand Bulletin}, year = {2009}, volume = {72}, pages = {17-42}, url = {http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2009/2009sep72-3leeper.pdf} }
Romer, C.D.	Fiscal Policy and Economic Recovery [Abstract] [BibTeX]	2009	Business Economics Vol. 44(3), pp. 132-135	article	URL
Abstract: The American Recovery and Reinvestment Act of 2009 is the biggest, boldest countercyclical fiscal stimulus in American history. What is its likely impact? Current econometric models indicate that a tax cut is likely to have a multiplier of about 1.0 and that spending has a multiplier of about 1.6 after about 18 months. Even the most sophisticated econometric analysis, however, suffers from “omitted variable” bias. In trying to take account of this, David Romer and I have found that the tax multiplier is more likely to be around two to three; and we suspect that the spending multiplier is correspondingly higher than the conventional estimates. Of course, every recession is different. The unique factors of this recession are analyzed to determine whether the multipliers are likely to deviate from historical averages.
BibTeX: @article{RePEc:pal:buseco:v:44:y:2009:i:3:p:132-135, author = {Christina D Romer}, title = {Fiscal Policy and Economic Recovery}, journal = {Business Economics}, year = {2009}, volume = {44}, number = {3}, pages = {132-135}, url = {http://link.springer.com/article/10.1057%2Fbe.2009.14} }
Abbas, S.M.A., Bouhga-Hagbe, J., Fatás, A., Mauro, P. and Velloso, R.C.	Fiscal Policy and the Current Account [Abstract] [BibTeX]	2011	IMF Economic Review Vol. 59(4), pp. 603-629	article	URL
Abstract: This paper examines the relationship between fiscal policy and the current account, drawing on a large sample of advanced, emerging, and low-income economies and using a variety of statistical methods: panel regressions, an analysis of large fiscal policy and current account changes, and panel vector autoregressions (VAR). On average, across estimation methods, a strengthening in the fiscal balance by 1 percentage point of GDP is associated with a current account improvement of about 0.3 percentage point of GDP. With our preferred estimation method (quarterly structural VAR using government consumption to identify fiscal policy shocks), the relationship is stronger, in the 0.3–0.5 range. The association is stronger in emerging markets and low-income countries; in economies that are more open to trade; and when the economy is somewhat overheated to begin with. The effect is, however, notably weaker during episodes of large fiscal policy and current account changes, suggesting that fiscal policy may have a more limited role in correcting large external imbalances.
BibTeX: @article{RePEc:pal:imfecr:v:59:y:2011:i:4:p:603-629, author = {S M Ali Abbas and Jacques Bouhga-Hagbe and Antonio Fatás and Paolo Mauro and Ricardo C Velloso}, title = {Fiscal Policy and the Current Account}, journal = {IMF Economic Review}, year = {2011}, volume = {59}, number = {4}, pages = {603-629}, url = {http://link.springer.com/article/10.1057%2Fimfer.2011.22} }
Blanchard, O.J. and Leigh, D.	Learning about Fiscal Multipliers from Growth Forecast Errors [Abstract] [BibTeX]	2014	IMF Economic Review Vol. 62(2), pp. 179-212	article	URL
Abstract: This paper investigates the relation between growth forecast errors and planned fiscal consolidation during the crisis. We find that, in advanced economies, stronger planned fiscal consolidation has been associated with lower growth than expected, with the relation being particularly strong, both statistically and economically, early in the crisis. A natural interpretation is that fiscal multipliers were substantially higher than implicitly assumed by forecasters. The weaker relation in more recent years may reflect in part learning by forecasters and in part smaller multipliers than in the early years of the crisis.
BibTeX: @article{RePEc:pal:imfecr:v:62:y:2014:i:2:p:179-212, author = {Olivier J Blanchard and Daniel Leigh}, title = {Learning about Fiscal Multipliers from Growth Forecast Errors}, journal = {IMF Economic Review}, year = {2014}, volume = {62}, number = {2}, pages = {179-212}, url = {http://link.springer.com/article/10.1057%2Fimfer.2014.17} }
Reinhart, C.M.	Fiscal Policy, the Real Exchange Rate, and Commodity Prices [Abstract] [BibTeX]	1991	IMF Staff Papers Vol. 38(3), pp. 506-524	article	URL
Abstract: The role of the international commodity market in transmitting disturbances is considered in a model that incorporates commodities as an input in production. The analysis employs a three-country framework: a liquidity-constrained commodity supplier and two industrial countries that import the commodity, export differentiated manufactured goods, and hold the outstanding debt of the commodity exporter. In this setting the impact of changes in fiscal policy, commodity supplies, and the real interest rate are assessed. Particular attention is paid to the responses of the real exchange rate, commodity prices, and the international distribution of debt to the various shocks.
BibTeX: @article{RePEc:pal:imfstp:v:38:y:1991:i:3:p:506-524, author = {Carmen M. Reinhart}, title = {Fiscal Policy, the Real Exchange Rate, and Commodity Prices}, journal = {IMF Staff Papers}, year = {1991}, volume = {38}, number = {3}, pages = {506-524}, url = {http://www.jstor.org/stable/3867156?origin=pubexport} }
Edelberg, W., Eichenbaum, M. and Fisher, J.D.	Understanding the Effects of a Shock to Government Purchases [Abstract] [BibTeX]	1999	Review of Economic Dynamics Vol. 2(1), pp. 166-206	article	URL
Abstract: This paper investigates the consequences of an exogenous increase in U.S. government purchases. We find that in response to such a shock, employment, output, and nonresidential investment rise, while real wages, residential investment and consumption expenditures fall. The paper argues that a simple variant of the neoclassical growth model which distinguishes between non-residential investment is consistent with this evidence.
BibTeX: @article{RePEc:red:issued:v:2:y:1999:i:1:p:166-206, author = {Wendy Edelberg and Martin Eichenbaum and Jonas D.M. Fisher}, title = {Understanding the Effects of a Shock to Government Purchases}, journal = {Review of Economic Dynamics}, year = {1999}, volume = {2}, number = {1}, pages = {166-206}, url = {http://www.sciencedirect.com/science/article/pii/S1094202598900369} }
Leeper, E.M.	Fiscal Limits and Monetary Policy [Abstract] [BibTeX]	2013	Central Bank Review Vol. 13(2), pp. 33-58	article	URL
Abstract: Every economy faces a "fiscal limit" that delivers the maximum government debt-GDP ratio that can be sustained without appreciable risk of default or higher inflation. But governments in advanced economies issue substantial nominal debt and nominal debt is a commitment to repay in nominal units. When such economies are approaching their fiscal limits, debt can be devalued through higher current and future inflation rates. The paper develops a simple bond market supply-demand apparatus to explain how fiscal policy can be a source of inflation, while monetary policy merely determines the timing of inflation
BibTeX: @article{RePEc:tcb:cebare:v:13:y:2013:i:2:p:33-58, author = {Eric M. Leeper}, title = {Fiscal Limits and Monetary Policy}, journal = {Central Bank Review}, year = {2013}, volume = {13}, number = {2}, pages = {33-58}, url = {http://www.tcmb.gov.tr/wps/wcm/connect/71bafd66-b24b-4c42-b927-9d58f90ebd49/may13-3.pdf?MOD=AJPERES&CACHEID=ROOTWORKSPACE71bafd66-b24b-4c42-b927-9d58f90ebd49} }
Christiano, L.J., Eichenbaum, M. and Vigfusson, R.	Alternative Procedures for Estimating Vector Autoregressions Identified with Long-Run Restrictions [Abstract] [BibTeX]	2006	Journal of the European Economic Association Vol. 4(2-3), pp. 475-483	article	URL
Abstract: We show that the standard procedure for estimating long-run identified vector autoregressions uses a particular estimator of the zero-frequency spectral density matrix of the data. We develop alternatives to the standard procedure and evaluate the properties of these alternative procedures using Monte Carlo experiments in which data are generated from estimated real business cycle models. We focus on the properties of estimated impulse response functions. In our examples, the alternative procedures have better small sample properties than the standard procedure, with smaller bias, smaller mean square error, and better coverage rates for estimated confidence intervals. (JEL: E24, E32, O3)
BibTeX: @article{RePEc:tpr:jeurec:v:4:y:2006:i:2-3:p:475-483, author = {Lawrence J. Christiano and Martin Eichenbaum and Robert Vigfusson}, title = {Alternative Procedures for Estimating Vector Autoregressions Identified with Long-Run Restrictions}, journal = {Journal of the European Economic Association}, year = {2006}, volume = {4}, number = {2-3}, pages = {475-483}, url = {http://onlinelibrary.wiley.com/doi/10.1111/jeea.2006.4.issue-2-3/issuetoc} }
Romer, C.D. and Romer, D.H.	Do Tax Cuts Starve the Beast? The Effect of Tax Changes on Government Spending [Abstract] [BibTeX]	2009	Brookings Papers on Economic Activity Vol. 40(1 (Spring), pp. 139-214	article	URL
Abstract: The hypothesis that decreases in taxes reduce future government spending is often cited as a reason for cutting taxes. However, because taxes change for many reasons, examinations of the relationship between overall measures of taxation and subsequent spending are plagued by problems of reverse causation and omitted variable bias. To deal with these problems, this paper examines the behavior of government expenditures following legislated tax changes that narrative sources suggest are largely uncorrelated with other factors affecting spending. The results provide no support for the hypothesis that tax cuts restrain government spending; indeed, they suggest that tax cuts may actually increase spending. The results also indicate that the main effect of tax cuts on the government budget is to induce subsequent legislated tax increases. Examination of four episodes of major tax cuts reinforces these conclusions.
BibTeX: @article{Romer2009a, author = {Christina D. Romer and David H. Romer}, title = {Do Tax Cuts Starve the Beast? The Effect of Tax Changes on Government Spending}, journal = {Brookings Papers on Economic Activity}, year = {2009}, volume = {40}, number = {1 (Spring}, pages = {139-214}, url = {http://www.brookings.edu/ /media/Files/Programs/ES/BPEA/2009_spring_bpea_papers/2009a_bpea_romer.pdf} }
Romer, C.D. and Romer, D.H.	The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks [Abstract] [BibTeX]	2010	American Economic Review Vol. 100(3), pp. 763-801	article	URL
Abstract: This paper investigates the impact of tax changes on economic activity. We use the narrative record, such as presidential speeches and Congressional reports, to identify the size, timing, and principal motivation for all major postwar tax policy actions. This analysis allows us to separate legislated changes into those taken for reasons related to prospective economic conditions and those taken for more exogenous reasons. The behavior of output following these more exogenous changes indicates that tax increases are highly contractionary. The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes. (JEL E32, E62, H20, N12)
BibTeX: @article{Romer2010, author = {Christina D. Romer and David H. Romer}, title = {The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks}, journal = {American Economic Review}, year = {2010}, volume = {100}, number = {3}, pages = {763-801}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.100.3.763} }
Romer, C.D. and Romer, D.H.	The Incentive Effects of Marginal Tax Rates: Evidence from the Interwar Era [Abstract] [BibTeX]	2014	American Economic Journal: Economic Policy Vol. 6(3), pp. 242-81	article	URL
Abstract: This paper uses the interwar United States as a laboratory for investigating the incentive effects of marginal income tax rates. We examine the impact of the large changes in rates in this period on taxable income using time-series/cross-section analysis of data by small slices of the income distribution. We find that the effect operated in the expected direction but was economically small, and that it is precisely estimated and highly robust. We also find suggestive time-series evidence of a positive impact of marginal rate cuts on business formation, but no evidence of an important effect on other indicators of investment.
BibTeX: @article{Romer2014, author = {Christina D. Romer and David H. Romer}, title = {The Incentive Effects of Marginal Tax Rates: Evidence from the Interwar Era}, journal = {American Economic Journal: Economic Policy}, year = {2014}, volume = {6}, number = {3}, pages = {242-81}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/pol.6.3.242} }
Rossi, B. and Zubairy, S.	What Is the Importance of Monetary and Fiscal Shocks in Explaining U.S. Macroeconomic Fluctuations? [Abstract] [BibTeX]	2011	Journal of Money, Credit and Banking Vol. 43(6), pp. 1247-1270	article	URL
Abstract: This paper analyzes the importance of monetary and fiscal policy shocks in explaining US macroeconomic fluctuations, and establishes new stylized facts. The novelty of our empirical analysis is that we jointly consider both monetary and fiscal policy, whereas the existing literature only focuses on either one or the other. Our main findings are twofold: fiscal shocks are relatively more important in explaining medium cycle fluctuations whereas monetary policy shocks are relatively more important in explaining business cycle fluctuations; and failing to recognize that both monetary and fiscal policy simultaneously affect macroeconomic variables might incorrectly attribute the fluctuations to the wrong source.
BibTeX: @article{Rossi2011, author = {Barbara Rossi and Sarah Zubairy}, title = {What Is the Importance of Monetary and Fiscal Shocks in Explaining U.S. Macroeconomic Fluctuations?}, journal = {Journal of Money, Credit and Banking}, year = {2011}, volume = {43}, number = {6}, pages = {1247-1270}, url = {http://hdl.handle.net/10.1111/j.1538-4616.2011.00424.x} }
Schmitt-Grohe, S. and Uribe, M.	Balanced-Budget Rules, Distortionary Taxes, and Aggregate Instability [Abstract] [BibTeX]	1997	Journal of Political Economy Vol. 105(5), pp. 976-1000	article	URL
Abstract: A traditional argument against a balanced-budget fiscal policy rule is that it amplifies business cycles by stimulating aggregate demand during booms via tax cuts and higher public expenditures and by reducing demand during recessions through a corresponding fiscal contraction. This paper suggests an additional source of instability that may arise from this type of fiscal policy rule. It shows that, within the standard neoclassical growth model, a balanced-budget rule can make expectations of higher tax rates self-fulfilling if the fiscal authority relies heavily on changes in labor income taxes to eliminate short-run fiscal imbalances.
BibTeX: @article{Schmitt-Grohe1997, author = {Schmitt-Grohe, Stephanie and Uribe, Martin}, title = {Balanced-Budget Rules, Distortionary Taxes, and Aggregate Instability}, journal = {Journal of Political Economy}, year = {1997}, volume = {105}, number = {5}, pages = {976-1000}, url = {http://www.journals.uchicago.edu/doi/10.1086/262101} }
Schmitt-Grohe, S. and Uribe, M.	Optimal fiscal and monetary policy under imperfect competition [Abstract] [BibTeX]	2004	Journal of Macroeconomics Vol. 26(2), pp. 183-209	article	URL
Abstract: This Paper studies optimal fiscal and monetary policy under imperfect competition in a stochastic, flexible-price, production economy without capital. It shows analytically that in this economy the nominal interest rate acts as an indirect tax on monopoly profits. Unless the social planner has access to a direct 100% tax on profits, he will always find it optimal to deviate from the Friedman rule by setting a positive and time-varying nominal interest rate. The dynamic properties of the Ramsey allocation are characterized numerically. As in the perfectly competitive case, the labour income tax is remarkably smooth, whereas inflation is highly volatile and serially uncorrelated. An exact numerical solution method to the Ramsey conditions is proposed.
BibTeX: @article{Schmitt-Grohe2004, author = {Schmitt-Grohe, Stephanie and Uribe, Martin}, title = {Optimal fiscal and monetary policy under imperfect competition}, journal = {Journal of Macroeconomics}, year = {2004}, volume = {26}, number = {2}, pages = {183-209}, url = {http://www.sciencedirect.com/science/article/pii/S0164070403000752} }
Schmitt-Grohé, S. and Uribe, M.	What's news in business cycles [BibTeX]	2012	Econometrica Vol. 80(6), pp. 2733-2764	article	URL
BibTeX: @article{Schmitt-Grohe2012, author = {Schmitt-Grohé, Stephanie and Uribe, Martin}, title = {What's news in business cycles}, journal = {Econometrica}, publisher = {Wiley Online Library}, year = {2012}, volume = {80}, number = {6}, pages = {2733--2764}, url = {http://onlinelibrary.wiley.com/doi/10.3982/ECTA8050/abstract} }
Sims, C.A.	Statistical Modeling of Monetary Policy and Its Effects [Abstract] [BibTeX]	2012	American Economic Review Vol. 102(4), pp. 1187-1205	article	URL
Abstract: No abstract is available for this item.
BibTeX: @article{Sims2012a, author = {Christopher A. Sims}, title = {Statistical Modeling of Monetary Policy and Its Effects}, journal = {American Economic Review}, year = {2012}, volume = {102}, number = {4}, pages = {1187-1205}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.102.4.1187} }
Susan Yang, S.-C.	Quantifying tax effects under policy foresight [Abstract] [BibTeX]	2005	Journal of Monetary Economics Vol. 52(8), pp. 1557-1568	article	URL
Abstract: No abstract is available for this item.
BibTeX: @article{SusanYang2005, author = {Susan Yang, Shu-Chun}, title = {Quantifying tax effects under policy foresight}, journal = {Journal of Monetary Economics}, year = {2005}, volume = {52}, number = {8}, pages = {1557-1568}, url = {http://www.sciencedirect.com/science/article/pii/S030439320500108X} }
Uhlig, H.	What are the effects of monetary policy on output? Results from an agnostic identification procedure [Abstract] [BibTeX]	2005	Journal of Monetary Economics Vol. 52(2), pp. 381-419	article	URL
Abstract: This paper proposes to estimate the effects of monetary policy shocks by a new ``agnostic'' method, imposing sign restrictions on the impulse responses of prices, nonborrowed reserves and the federal funds rate in response to a monetary policy shock. No restrictions are imposed on the response of real GDP to answer the key question in the title. We find that ``contractionary'' monetary policy shocks have an ambiguous effect on real GDP. Otherwise, the results found in the empirical VAR literature so far are largely confirmed. The results could be paraphrased as a new Keynesian-new classical synthesis: even though the general price level is sticky for a period of about a year, money may well be close to neutral. We provide a counterfactual analysis of the early 80's, setting the monetary policy shocks to zero after December 1979, and recalculating the data. We found that the differences between observed real GDP and counterfactually calculated real GDP was not very large. Thus, the label ``Volcker-recession'' for the two recessions in the early 80's appears to be misplaced.
BibTeX: @article{Uhlig2005, author = {Uhlig, Harald}, title = {What are the effects of monetary policy on output? Results from an agnostic identification procedure}, journal = {Journal of Monetary Economics}, year = {2005}, volume = {52}, number = {2}, pages = {381-419}, url = {http://www.sciencedirect.com/science/article/pii/S0304393205000073} }
Uhlig, H.	Some Fiscal Calculus [BibTeX]	2010	American Economic Review Vol. 100(2), pp. 30-34	article	URL
BibTeX: @article{Uhlig2010, author = {Uhlig, Harald}, title = {Some Fiscal Calculus}, journal = {American Economic Review}, year = {2010}, volume = {100}, number = {2}, pages = {30-34}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.100.2.30} }
Woodford, M.	Fiscal Requirements for Price Stability [Abstract] [BibTeX]	2001	Journal of Money, Credit and Banking Vol. 33(3), pp. 669-728	article	URL
Abstract: Maintaining price stability requires not only commitment to an appropriate monetary policy rule, but an appropriate fiscal policy rule as well. Ricardian equivalence does not imply that fiscal policy is irrelevant, except in the case of a certain class of policies ("Ricardian" policies). The role of fiscal developments in inflation determination under a non-Ricardian regime is illustrated through an analysis of the bond-price support regime of the 1940s. A monetary-fiscal regime with attractive properties would combine a "Taylor rule" for monetary policy with nominal-deficit targeting as a fiscal policy commitment.
BibTeX: @article{Woodford2001, author = {Woodford, Michael}, title = {Fiscal Requirements for Price Stability}, journal = {Journal of Money, Credit and Banking}, year = {2001}, volume = {33}, number = {3}, pages = {669-728}, url = {http://www.blackwellpublishing.com/journal.asp?ref=0022-2879} }
Woodford, M.	Simple Analytics of the Government Expenditure Multiplier [Abstract] [BibTeX]	2011	American Economic Journal: Macroeconomics Vol. 3(1), pp. 1-35	article	URL
Abstract: This paper explains the key factors that determine the output multiplier of government purchases in New Keynesian models, through a series of simple examples that can be solved analytically. Sticky prices or wages allow for larger multipliers than in a neoclassical model, though the size of the multiplier depends crucially on the monetary policy response. A multiplier well in excess of one is possible when monetary policy is constrained by the zero lower bound, and in this case welfare increases if government purchases expand to partially fill the output gap that arises from the inability to lower interest rates. (JEL E12, E23, E32, E62, H20, H50)
BibTeX: @article{Woodford2011, author = {Michael Woodford}, title = {Simple Analytics of the Government Expenditure Multiplier}, journal = {American Economic Journal: Macroeconomics}, year = {2011}, volume = {3}, number = {1}, pages = {1-35}, url = {http://pubs.aeaweb.org/doi/pdfplus/10.1257/mac.3.1.1} }
Yang, S.-C.S.	Tentative evidence of tax foresight [Abstract] [BibTeX]	2007	Economics Letters Vol. 96(1), pp. 30-37	article	URL
Abstract: No abstract is available for this item.
BibTeX: @article{Yang2007a, author = {Yang, Shu-Chun Susan}, title = {Tentative evidence of tax foresight}, journal = {Economics Letters}, year = {2007}, volume = {96}, number = {1}, pages = {30-37}, url = {http://www.sciencedirect.com/science/article/pii/S0165176506004289} }
Zubairy, S.	On Fiscal Multipliers: Estimates From A Medium Scale Dsge Model [Abstract] [BibTeX]	2014	International Economic Review Vol. 55, pp. 169-195	article	URL
Abstract: This article contributes to the debate on fiscal multipliers, in the context of an estimated dynamic stochastic general equilibrium model, featuring a rich fiscal policy block and a transmission mechanism for government spending shocks. I find the multiplier for government spending to be 1.07, which is largest on impact. The multipliers for labor and capital tax on impact are 0.13 and 0.34, respectively. The effects of tax cuts take time to build and exceed stimulative effects of spending by 12-20 quarters. I carry out counterfactual exercises to show how alternative financing methods and expected monetary policy have consequences for the size of fiscal multipliers.
BibTeX: @article{Zubairy2014, author = {Sarah Zubairy}, title = {On Fiscal Multipliers: Estimates From A Medium Scale Dsge Model}, journal = {International Economic Review}, year = {2014}, volume = {55}, pages = {169-195}, url = {http://hdl.handle.net/10.1111/iere.2014.55.issue-1} }