Using micro data from the U.S. Consumer Expenditure Survey and Current Population Survey, I document that government spending shocks affect individuals differently over the life cycle. Young households increase their consumption after an expansionary shock while prime-age households reduce it,...

We explore the short-term macrodynamics of stabilization policy at the effective lower bound (ELB) of the nominal interest rate, in an environment characterized by heterogenous and endogenously time-varying private-sector output and inflation expectations driven by evolutionary dynamics. We show...

This paper estimates the causal impact of the Great Recession-era Building the Education Revolution (BER) school infrastructure stimulus program on labour market outcomes in Australia. The evidence suggests that the program provided value for money, with costs per job-year saved most likely...

Anticipated stimulus policies enacted perhaps in response to a crisis can motivate precautionary behaviour during the preceding expansion. Ex post stimulus can be ex ante prudential. Prudential fiscal stimulus both speeds up economic recoveries, and prevents crises from occurring in the first...

To explain the fact that government spending and tax policy are procyclical in emerging and developing countries, we develop a model for the joint behavior of optimal tax rates and government spending over the business cycle. Our set-up relies on financial frictions, which have been shown to be...

We explore the short-term macrodynamics of stabilization policy at the effective lower bound (ELB) of the nominal interest rate, in an environment characterized by heterogenous and endogenously time-varying private-sector output and inflation expectations driven by evolutionary dynamics. We show...

A large literature has documented that fiscal policy is procyclical in emerging markets and developing economies and acyclical/countercyclical in advanced economies. This paper analyzes fiscal procyclicality in commodity-exporting countries. It first shows that the degree of fiscal...

This paper studies the local determinacy requirements and effects of a money-financed fiscal stimulus under fiscal stress in a canonical New Keynesian model. We consider three alternative monetary policies and find that: (1) The money-financed policy adopted in Gali (2020) to keep real debt...

Using a heterogeneous agent model calibrated to match measured spending dynamics over four years following an income shock (Fagereng, Holm, and Natvik (2021)), we assess the effectiveness of three fiscal stimulus policies employed during recent recessions. Unemployment insurance (UI) extensions...

Abstract. The stimulus effects of expansionary fiscal policy under average inflationtargeting (AIT) depends on both monetary and fiscal policy regimes. AITfeatures an inflation makeup under the monetary regime, but not under thefiscal regime. In normal times, AIT amplifies the short-run...

The aim of this study is to determine the nature of the discretionary fiscal policy practiced by non-euro EU member states, namely to deduce some bias for one of the two types of fiscal policies - procyclical or countercyclical. For this purpose, we used time series for the period 1995-2020, of...

Would countercyclical fiscal policy during recessions improve or worsen the gender employment gap? We answer this question by exploring the state-dependent impact of fiscal spending shocks on employment by gender in the G-7 countries. Using the local projection method, we find that, during...

As part of Germany’s fiscal response to the Covid-19 pandemic, parents received three payments totalling e450 per child. Randomization in the payment dates and daily scanner data allow us to identify the effects of these transfers on household spending. We find a significant but small spending...

Since the outbreak of the Corona virus, policymakers around the globe introduced numerous emergency measures such as the wearing of masks, restrictions to mobility and travel and the shutdown of large parts of the economy, including firms, workplaces and schools. The implementation of...

We exploit a panel of city-level data with rich demographic information to estimate the distributional effects of Department of Defense spending and its effects on a range of social outcomes. The income generated by defense spending accrues predominantly to households without a bachelor's...

We estimate the impact of fiscal stimulus measures enacted in response to COVID-19 on U.S. GDP, investment and exports. We apply a dynamic computable general equilibrium model adept at estimating total direct and indirect effects and their time-path. Initial stimulus bills, including the CARES...

Using iterative experiments to uncover causal links between critical policy details and outcomes helps to optimize policy design. This paper studies a large-scale staged fiscal stimulus program conducted during the COVID-19 pandemic, in which a provincial government in China disbursed digital...

This paper investigates the influence of possible bank default and bank leverage constraints on monetary and macroprudential policy prescriptions. We build a New Keynesian model with banks that channel funds from households to firms. Banks face endogenous leverage constraints and are subject to...

Recent influential work argue that a gradual increase in the sales tax stimulates economic activity in a liquidity trap by boosting inflation expectations. Higher public infrastructure investment should also be more expansive in a liquidity trap than in normal times by raising the potential...

While the setting of the countercyclical capital buffer (CCyB) is not an automatic decision, insights from indicators, such as the credit-to-GDP gap, are a starting point to inform the policy decision. This paper identifies an optimal rule to map the credit-to-GDP gap adjusted to the guide to...

We investigate the implications of extra-normal government spending under COVID-19 for commercial bank lending growth between 2019Q4 and 2020Q4 in a sample of 3000 banks from 71 countries. We control for pre-pandemic structural factors, bank characteristics and government debt. To address the...

Expansions in public spending induce a surge in private consumption that is accompanied by increasing post-tax income of households. Endogenously reacting income, however, is insufficient to rationalize conditional comovement of private and public spending: household expenditures even expand in...

We investigate the implications of extra-normal government spending under the COVID-19 pandemic for commercial bank lending growth between 2019Q4 and 2020Q4 in a large sample of over 3000 banks from 71 countries. We control for pre-pandemic structural factors, bank characteristics and government...

Despite a large body of empirical work analyzing the causal effects of fiscal stimulus on employment in developed countries, little evidence exists in developing economies and evidence from China is scarce. Using the initial share of local industries together with allocated spending announced in...

We simulate the fiscal stimulus packages set up by the German government to alleviate the costs of the COVID-19 pandemic in a dynamic New Keynesian multi-sector general equilibrium model. We find that, cumulated over 2020-2022, output losses relative to steady state can be reduced by more than 4...

This paper examines how European banks adjusted their lending subsequent to the release of the countercyclical capital buffers (CCyB) during the COVID-19 pandemic. At its onset in 2020Q1, being exposed to a higher ex-ante countercyclical capital buffer led to a reduction in banks' lending. Yet...

Motivating with two scenarios in which the government spending in China timely reacted to output shock within a quarter, this letter points out a downward bias in the estimation of Chinese government spending multiplier using the classical lag restriction for shock identification in a quarterly...

In response to the record-breaking COVID19 recession, many governments have adopted unprecedented fiscal stimuli. While countercyclical fiscal policy is effective in fighting conventional recessions, little is known about the effectiveness of fiscal policy in the current environment with...

In response to the record-breaking COVID19 recession, many governments have adopted unprecedented fiscal stimuli. While countercyclical fiscal policy is effective in fighting conventional recessions, little is known about the effectiveness of fiscal policy in the current environment with...

Die deutsche Schuldenbremse wird als Investitionsbremse kritisiert. Fraglich ist insbesondere, ob die Schuldenbremse bei konjunkturellen Schwankungen im Regelfall genügend Spielraum für eine antizyklische Kreditaufnahme lässt. Volkswirtschaftlich wichtige öffentliche Investitionen könnten...

Almost all countries announced fiscal support programs once COVID-19 hit. However, there was significant diversity in the magnitude and composition of these fiscal stimulus programs. These differences were determined by myriad political, financial, social, and economic factors - these factors...