The interaction of macroeconomic variables may change as the nominal shortterm interest rates approaches zero. In this paper, we propose an empirical model capturing these changing dynamics with a time-varying parameter vector autoregressive process. State-dependent parameters are determined by...

The interaction of macroeconomic variables may change as the nominal shortterm interest rates approaches zero. In this paper, we propose an empirical model capturing these changing dynamics with a time-varying parameter vector autoregressive process. State-dependent parameters are determined by...

The volume collects the essays presented at the 15th Workshop on Public Finance organised by Banca d'Italia in Perugia from 4 to 6 April 2013. The workshop focused on the link between fiscal policy and macroeconomic imbalances and comprised four sessions. The first session concentrated on the...

We test for nonlinear effects of asset prices on the fiscal policy of three major European economies (the UK, Italy and Spain). We model primary government spending and government revenue as time-varying transition probability Markovian processes (TVPMS). We find that while in Italy fiscal...