This paper studies the effects of discretionary fiscal policy on output volatility and economic growth. Using data for ninety-one countries we isolate three empirical regularities: (1) Governments that use fiscal policy aggressively induce significant macroeconomic instability; (2) The...

We develop a model in which innovations in an economy's growth potential are an important driving force of the business cycle. The framework shares the emphasis of the recent new shock literature on revisions of beliefs about the future as a source of fluctuations, but differs by tying these...

We develop a model in which innovations in an economy's growth potential are an important driving force of the business cycle. The framework shares the emphasis of the recent "new shock" literature on revisions of beliefs about the future as a source of fluctuations, but differs by tieing these...