In a dynamic, three-region environmental multi-sector general equilibrium model (called EMuSe), we find that carbon pricing generates a recession initially as production costs rise. Benefits from lower emissions damage materialize only in the medium to long run. A border adjustment mechanism...

The recent financial crisis was characterized by the sizeable fiscal cost of banking sector bail out operations and the significant automatic and discretionary fiscal policy response to shrinking output, which have put increased pressure on public finances in many industrialized countries. This...

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 analyze the effects of world wars on the macroeconomic dynamics of the U.S., France, Germany, and the UK, by means of an estimated open-economy model. The model allows wars to affect the economy through capital depreciation, sovereign default, a military draft, household preferences, and...

This paper studies the effectiveness of Euro Area (EA) fiscal policy, during the recent financial crisis, using an estimated New Keynesian model with a bank. A key dimension of policy in the crisis was massive government support for banks — that dimension has so far received little attention...

This paper develops a structural macroeconometric model of the world economy, disaggregated into thirty five national economies. This panel unobserved components model features a monetary transmission mechanism, a fiscal transmission mechanism, and extensive macrofinancial linkages, both within...

The recent Financial Crisis reminded us once again about the vulnerability of the global economy. Economists were forced to think about the effectiveness of their policies. During this period, many governments across the world had adopted fiscal measures to boost their local economies. The path...

The worst global downturn since the Great Depression has caused ballooning budget deficits in most nations, as tax revenues collapse and governments bail out financial institutions and attempt countercyclical fiscal policy. With notable exceptions, most economists accept the desirability of...

This paper uses the Aguiar and Gopinath (2007) methodology in order to estimate whether 'the cycle is the trend' in 23 emerging markets and 22 OECD economies. These estimates are then used to test whether procyclical fiscal policy in emerging countries is due to persistent shocks to per-capita...

Relying on a large sample of countries, this paper quantifies the effect of political constraints, as measured by legislative control by the incumbent government, on the size of fiscal stimulus packages that have been put in place as reaction to the Great Recession. The results suggest that on...