The Japanese government has amassed a huge amount of gross public debts over the past several decades. However, previous empirical works dealing with vector auto-regression (VAR) have not considered the effect of debt on fiscal policy and the macro economy. In this paper, we incorporate debt...

Announcing a large fiscal stimulus may signal the government’s pessimism about the severity of a recession to the private sector, impairing the stabilizing effects of the policy. Using a theoretical model, we show that these signaling effects occur when the stimulus exceeds expectations and...

Announcing a large fiscal stimulus may signal the government’s pessimism about the severity of a recession to the private sector, impairing the stabilizing effects of the policy. Using a theoretical model, we show that these signaling effects occur when the stimulus exceeds expectations and...