We study the effects of government spending by using a structural, large dimensional, dynamic factor model. We find that the government spending shock is non-fundamental for the variables commonly used in the structural VAR literature, so that its impulse response functions cannot be...

This paper investigates the effects of fiscal policy on the trade balance using a structural factor model. A fiscal policy shock worsens the trade balance and produces an appreciation of the domestic currency but the effects are quantitatively small. The findings match the theoretical...

This paper investigates the effects of government spending on the real exchange rate and the trade balance in the US using a new VAR identification procedure based on spending forecast revisions. I find that the real exchange rate appreciates and the trade balance deteriorates after a government...

Many proponents of conservative fiscal policies talk of the budget deficit as being a matter of intergenerational equality. However, this paper shows the younger generations (and those yet to be born) will contribute more to the deficit than older generations. This analysis uses data from the...

This paper looks at three countries that have been hard-hit by the world economic recession, and have turned to the IMF for assistance: Hungary, Latvia, and Ukraine. In all of these countries, it would appear that there were more sensible responses to the crisis that would reduce the loss of...

This paper looks at the planned austerity measures in Spain, the rationale for the spending cuts and tax increases, likely outcomes for future debt-to-GDP ratios, and the probable results of alternative policies.

The Great Recession has left tens of millions of families facing unemployment, underemployment and the threat of losing their home. However,concerns over the deficit threaten to derail efforts to turn around the economy and spur employment. This report attempts to correct many of the...