This paper investigates the response of real wages and hours worked to an exogenous shock in fiscal policy. We identify this shock with the dynamic response of government purchases and tax rates to an exogenous increase in military purchases. The fiscal shocks that we isolate are characterized...

This paper discusses the empirical performance of a widely used model of nominal rigidities: the Calvo model of sticky goods prices. We argue that there is overwhelming evidence against this model. But this evidence is generated under three key maintained assumptions. First, there is no lag...