In this paper, we elaborate on the notion of effective consumption and its role in determining the outcome of fiscal changes. More specifically, we investigate whether government consumption, by acting either as a complement or a substitute to private consumption, can help explain the...

The 'saving for a rainy day' hypothesis implies that households' saving decisions reflect that they can (rationally) predict future income declines. The empirical relevance of this hypothesis plays a key role in discussions of fiscal policy multipliers and it holds under the null that the...

Recently, it has been suggested that the effect of government expenditure on private consumption is dependent on the level of public debt. More specifically, a higher public debt implies a less Keynesian response in private consumption. In this paper we investigate if this theory is supported by...

This paper analyses the relation between private and government consumption in 23 OECD countries between 1970 and 2001. In particular it addresses the issue of whether government consumption is a substitute for or a complement to private consumption. The empirical analysis is made with panel...

Closely following the seminal contribution of Jappelli and Pistaferri (2014) - based on Italian household survey data - we employ data of 22 European countries to assess the role of heterogeneity of the marginal propensity to consume (MPC) for fiscal policy in the Euro area. We document an...

We use a new panel dataset of credit card accounts to analyze how consumers responded to the 2001 federal income tax rebates. We estimate the monthly response of credit card payments, spending, and debt, exploiting the unique, randomized timing of the rebate disbursement. We find that on average...

This paper analyzes the effects of fiscal policy in an open economy. We extend the savers-spenders theory of Mankiw (2000) to a small open economy with endogenous labor supply. We first show how the Dornbusch (1983) consumption-based real interest rate for open economies is modified when labor...

In this paper, we study the effects of fiscal policy during different fiscal policy regimes. More specifically, we investigate how different factors, such as size, duration and composition of fiscal changes, can alter the effects of fiscal policy on private consumption. Using an unbalanced panel...

We document large differences between the United States and France in allocations of consumption expenditures and time by age. Using a life-cycle model, we quantify to what extent tax and transfer programs and market and home productivity can account for the differences. We find that while labor...