We use the time series of shifts in U.S. Federal tax liabilities constructed by Romer and Romer to estimate tax multipliers. Differently from the single-equation approach adopted by Romer and Romer, our estimation strategy (a Var that includes output, government spending and revenues, inflation...

This paper shows how the richer frequency and variety of fiscal policy shocks available in an international sample can be analyzed recognizing the heterogeneity that exists across different countries. The main conclusion of our empirical analysis is that the question 'what is the fiscal policy...

From 1970 to 1985, Israel experienced high inflation. It rose in three jumps to new plateaus and eventually exceeded 400% per annum. This paper claims that anticipated monetary and fiscal effects of a massive government bailout of owners of fallen bank shares caused the last big jump in...

A central tenet of the Maastricht Treaty is that a successful European Monetary Union requires sustainable public finances of its member states. Yet there is no clear definition of sustainability. The economist’s common use of the term builds on the concept of an intertemporal budget...

Two literatures in political economy argue that differences in political institutions help explain variation in the fiscal performance of countries. They indentify electoral systems and institutions that structure the formation of the budget as important determinants of the budget deficit. In...

The currently available empirical evidence shows remarkable differences between various estimates of the effects on U.S. output of an exogenous shift in Federal tax liabilities. Shocks identified via the narrative method imply a multiplier of about three over an horizon of three years. Tax...

A shift in taxes or in government spending (a ”fiscal shock”) at some point in time puts a constraint on the path of taxes and spending in the future, since the government intertemporal budget constraint will eventually have to be met. This simple fact is surprisingly overlooked in analyses...

In the coming decades, the share of people in working age will fall significantly in most developed countries. According to optimal taxation theory, public debts should be reduced before the baby-boom generation retires. I find that if debts are instead maintained at the current levels, welfare...

Since the 2008 global financial crisis, and after decades of relative neglect, the importance of the financial system and its episodic crises as drivers of macroeconomic outcomes has attracted fresh scrutiny from academics, policy makers, and practitioners. Theoretical advances are following a...

We analyze the joint dynamics of religious beliefs, scientific progress and coalitional politics along both religious and economic lines. History offers many examples of the recurring tensions between science and organized religion, but as part of the paper’s motivating evidence we also...