The empirical VAR literature on the monetary transmission mechanism in closed economies has been successful in providing evidence with which theoretical models of the monetary transmission mechanism are now confronted. The empirical VAR literature on the monetary transmission mechanism in open...

A fiscal shock due to a shift in taxes or in government spending will, at some point in time, constrain the future path of taxes and spending, since the government's intertemporal budget constraint will eventually have to be met. This simple fact is surprisingly overlooked in analyses of the...