There is a significant controversy among academics and policy-makers about whether policies matter for economic growth. Recently, Acemoglu et al. (2003) and Easterly (2004) have presented empirical evidence against the commonly held view that policies play an important role in the process of...

This paper shows how the richer frequency and variety of fiscal policy shocks available in an international sample can be analyzed recognizing the heterogeneity that exists across different countries. The main conclusion of our empirical analysis is that the question 'what is the fiscal policy...

This paper estimates the heterogeneous responses to the 2001 income tax rebates across endogenously determined groups of American households. Around 45% of the sample saved the entire value of the rebate. Another 20%, with low income and liquid wealth, spent a significant amount. The largest...

This paper develops a medium-scale dynamic, stochastic, general equilibrium (DSGE) model for fiscal policy simulations. Relative to existing models of this type, our model incorporates two important features. First, we consider a two-country monetary union structure, which makes it well suited...

This paper estimates the dynamic effects of changes in taxes in the United States. We distinguish between the effects of changes in personal and corporate income taxes using a new narrative account of federal tax liability changes in these two tax components. We develop an estimator in which...

What are the output responses to fiscal policy? Despite important advances reported in the literature, quantifying the size of the fiscal multiplier remains a challenge. Indeed, the quest to estimate a unique fiscal multiplier is probably an ill-posed one. The magnitude of the multiplier may...

The sovereign debt crisis in the euro area has raised interest in early warning indicators, aimed at signalling the build-up of fiscal stress in advance and helping prevent crises by means of a timely counteraction of fiscal and macroeconomic policies. This paper presents possible improvements...

In this paper we reflect on the role that fiscal policy could play in the resolution of the crisis in Eurozone countries crippled by both public and private debt, and beset by growth and competitiveness problems. As an illustration, we revisit the Spanish case, a paradigmatic example of the...

This paper investigates the effects of government spending on the real exchange rate and the trade balance in the US using a new VAR identification procedure based on spending forecast revisions. I find that the real exchange rate appreciates and the trade balance deteriorates after a government...