This paper disentangles fluctuations in disaggregated prices due to macroeconomic and sectoral conditions using a factor-augmented vector autoregression estimated on a large data set. On the basis of this estimation, we establish eight facts: (1) Macroeconomic shocks explain only about 15% of...

Fiscal policy restrictions are often criticized for limiting the ability of governments to react to business cycle fluctuations. Therefore, the adoption of quantitative restrictions is viewed as inevitably leading to increased macroeconomic volatility. In this Paper we use data from 48 US states...

This paper studies the role of automatic stabilizers using a sample of OECD countries and US states. We find that there is a strong and robust negative correlation between measures of government size and the volatility of output. This correlation is robust to the inclusion of a large set of...

We use 6-digit bilateral trade data to document the effect of WTO/GATT membership on the extensive and intensive product margins of trade. We construct gravity equations for the two product margins where the specifications of these gravity equations are motivated by the model of Eaton and Kortum...

There is a significant controversy among academics and policy-makers about whether policies matter for economic growth. Recently, Acemoglu et al. (2003) and Easterly (2004) have presented empirical evidence against the commonly held view that policies play an important role in the process of...

The recovery from the last recession has been slower than any other recovery in the post-WWII period both in the US and in many other advanced economies. There is an ongoing debate around the causes of such a slow recovery. Are there any structural factors that are constraining the speed of...

We analyze empirically the cyclical behavior of fiscal policy among a group of 23 OECD countries. We introduce a framework to capture fiscal policy stance in a way that brings together automatic stabilizers and discretionary fiscal policy. We show that, for most countries, automatic changes in...

We consider independent monetary policy committees as a simple way of attaining relatively low inflation without completely sacrificing the stabilization role of monetary policy. If central banker's types are unknown, then for a wide range of parameters an independent monetary policy committee...

We study empirically the macroeconomic effects of an explicit de jure quantitative goal for monetary policy. Quantitative goals take three forms: exchange rates, money growth rates, and inflation targets. We analyse the effects on inflation of both having a quantitative target, and of hitting a...

This Paper compares the dynamic impact of fiscal policy on macroeconomic variables implied by a large class of general equilibrium models with the empirical results from an identified vector autoregression. In the data we find that positive innovations in government spending are followed by...