The literature on localised knowledge spillovers and growth focuses on the relative importance of intra vs. inter-industry externalities, but the nature and the characteristics of the dynamic linkages across manufacturing sectors are not investigated. In this Paper we perform a very...

This Paper studies the effects of fiscal policy on GDP, inflation and interest rates in five OECD countries, using a structural Vector Autoregression approach. Its main results can be summarized as follows: 1) The effects of fiscal policy on GDP tend to be small: government spending multipliers...

A popular view among economists, policy-makers, and the media, is that the Maastricht Treaty and then Stability and Growth Pact have significantly impaired the ability of EU governments to conduct a stabilizing fiscal policy and to provide an adequate level of public infrastructure. In this...

In this paper, we study the link between profitability, fiscal policy and exchange rate regimes. We are particularly interested in adding realism to the treatment of fiscal policy by looking explicitly at its individual components. We show that the different types of government spending and...

This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. In particular, we investigate how different types of fiscal policy affect profits and, as a result, investment. We find a sizeable negative effect of public spending - and in particular of its public...

In a seminal contribution, Romer and Romer (2010) introduce a new dataset of exogenous tax changes and estimate a tax multiplier at 3 years of about -3. These results have been criticized as implausibly large. In this paper, I argue that on theoretical grounds the discretionary component of...

We derive necessary and sufficient conditions under which a set of variables is informationally sufficient, i.e. it contains enough information to estimate the structural shocks with a VAR model. Based on such conditions, we suggest a procedure to test for informational sufficiency. Moreover, we...

This paper uses a structural, large dimensional factor model to evaluate the role of 'news' shocks (shocks with a delayed effect on productivity) in generating the business cycle. We find that (i) existing small-scale VECM models are affected by 'non-fundamentalness' and therefore fail to...

As governments around the world contemplate slashing budget deficits, the "expansionary fiscal consolidation hypothesis" is back in vogue. I argue that, as a statement about the short run, it should be taken with caution. Alesina and Perotti (1995) and Alesina and Ardagna (2010) (AAP) show that...

Does it matter, for the size of the government spending multiplier, which category of agents bears the brunt of the necessary adjustment in taxes? In an economy with heterogeneous agents and imperfect financial markets, the answer depends on whether or not New Keynesian features, such are price...