We conduct a positive analysis on the effects of ‘externalities’ produced by government spending. To this effect, we estimate, using U.S. data, an RBC model with two salient features. First, we allow government consumption to directly affect the marginal utility of consumption. Second, we...

We incorporate factors extracted from a large panel of macroeconomic time series in the predictions of two signals related to real economic activity: business cycle fluctuations and the medium- to long-run component of output growth. The latter is simply output growth short of fluctuations with...