The Great Recession, and the fiscal response to it, has revived interest in the size of fiscal multipliers. Standard business cycle models have difficulties generating multipliers greater than one. And they also cannot produce any significant state-dependence in the size of the multipliers over...

We develop a dynamic stochastic general equilibrium model to study bank risk and sovereign risk interdependence in the Euro Area. We find that an increase in capital investment risk shock, results in a considerably deeper recession when sovereign risk is also present. This result has three...

We study the joint dynamics of foreign capital flows and real activity during the recent boom-bust cycle of the Spanish economy, using a three-country New Keynesian model with credit constrained households and firms, a construction sector and a government. We estimate the model using...

This paper proposes a methodology for computing effective average tax rates using national accounts and revenue statistics, and applies it to construct time-series of tax rates for the seven largest industrialized countries. The resulting tax rates are consistent with available estimates of...

This paper studies the impact of income inequality on fiscal conservatism when an increase in inequality affects the bottom portion of income distribution. It is argued that, contrary to what is generally assumed in the economic literature, inequality will then be associated with less, rather...

Cyclical components are analytically computed in a theoretical model of stochastic endogenous fluctuations and growth. Volatility is shown to depend on the speed of convergence of the cyclical component, the expected length of a cycle and on the altitude of the slump. Taxes affect these channels...

The global financial crisis has lead to a renewed interest in discretionary fiscal stimulus. Advocates of discretionary measures emphasize that government spending can stimulate additional private spending --- the so-called Keynesian multiplier effect. Thus, we investigate whether the...

In this paper, we revisit the effects of government spending shocks on private aggregate consumption within an estimated New-Keynesian DSGE model of the euro area featuring non-Ricardian households and a relatively detailed fiscal policy set up. Employing Bayesian inference methods, we show that...

Fluctuations of representative agent economies are not very costly. So if business cycles matter, it must be because agents face uninsured idiosyncratic risk which is somehow worsened by aggregate fluctuation. Idiosyncratic risk could be counteracted either through aggregate stabilization or...