Ramey (2011a) and others argue that increases in government spending associated with wars and military build-ups constitute a good instrument for measuring the macroeconomic effects of fiscal shocks. We argue that this instrument has two important drawbacks: the composition of government...

This paper undertakes a normative investigation of the quantitative properties of optimal tax smoothing in a business cycle model with state contingent debt, capital-skill complementarity, endogenous skill formation and stochastic shocks to public consumption as well as total factor and capital...

Fiscal policy has become quite controversial in the post-Keynesian era, the debate over the Obama stimulus package being a contentious recent example. Some pundits go so far as to take the position that macroeconomic theory has failed to meaningfully progress in terms of providing useful...

Slower growth of the labour force and an increase in old-age dependency will reduce the growth of aggregate output and output per capita in many developed countries. However, a major question is whether there is any systematic link between demographics and the productivity of those who will...

We investigate the macroeconomic effects of government spending shocks in Korea. We compare results obtained with two alternative approaches: the narrative approach and Structural Vector-Autoregressive model (SVAR). We propose a new methodology for identifying exogenous and unexpected fiscal...

We study the impact of global climate change on the prevalence of tropical diseases using a heterogeneous agent dynamic general equilibrium model. In our framework, households can take actions (e.g., purchasing bednets or other goods) that provide partial protection from disease. However, these...

We investigate the short-term effects of fiscal adjustment on economic activity in 20 OECD countries from 1970 to 2009. We compare two approaches: the traditional approach based on changes in cyclically adjusted primary balance (CAPB) and the narrative approach based on historical records....

Recent criticism from different sides has expressed the view that, with scarce resources, there is little justification for massive public funding of higher education. Central to the debate is the conjecture that colleges and universities use their resources inefficiently and focus...

Weakening bargaining power of unions and the increasing integration of the world economy may affect the volatility of capital and labor incomes. This paper documents and explains changes in income volatility. Using a theoretical framework which builds distribution risk into a real business cycle...

Casual empiricism suggests that “unwarranted” wage changes, defined as the part of wage growth that is not explained by changes in labour productivity, are negatively associated with the return on capital. The main point of this paper is to show that “unwarranted” wage changes have no...