Recent macro developments in the euro area have highlighted the interactions between fiscal policy, sovereign debt, and financial fragility. We take a structural macroeconomic model with frictions in the financial intermediation process, in line with recent research, but introduce asset choice...

How does private consumption react to an exogenous increase in government expenditure? Standard structural vector autoregressions (SVARs) usually report a positive GDP as well as consumption response, while event studies report a negative consumption response. We investigate in a SVAR whether...

We investigate the short-term effects of fiscal policy shocks on the German economy following the SVAR approach by Blanchard and Perotti (2002). We find that direct government expenditure shocks increase output and private consumption on impact with low statistical significance, while they...

Cyclically induced changes in taxes and government expenditures which tend to stabilise aggregate output are called automatic stabilisers. Using a small macro model, this paper reviews alternative methods of measuring the smoothing power of automatic stabilisers and discusses their relationship...

We propose a method for indentifying discretionary fiscal policy with real time data. The starting point is the observation that automatic stabilizers should depend on true GDP, while discretionary fiscal policy depends on the information that policy makers have in real time. We approximate the...

This paper presents a procedure to determine policy feedback rules in dynamic stochastic general equilibrium (DSGE) models. We illustrate our approach with fiscal feedback rules for tax instruments in a standard medium-scale DSGE model. First, we approximate the optimal dynamic behavior of the...

In this paper, we present a disaggregated framework for the analysis of past and projected structural developments in the most relevant revenue and expenditure categories and the fiscal balance. The framework, in particular, distinguishes between the effects of discretionary fiscal policy and of...

This paper uses an extended version of 'FiMod - A DSGE Model for Fiscal Policy Simulations' (Stähler and Thomas, 2011) with endogenous job destruction decisions by private firms to analyze the effects of several currently discussed labor market reforms on the Spanish economy. The main focus is...

This paper develops a medium-scale dynamic, stochastic, general equilibrium (DSGE) model for fiscal policy simulations. Relative to existingmodels of this type, our model incorporates a two-country monetary union structure, which makes it well suited to simulate fiscal measures by relatively...

This paper provides new evidence that taxes affect capital structure choice, using a unique and comprehensive panel data set which covers 86,173 German non-financial firms over the years 1973-2008. Following the Graham methodology to simulate marginal tax rates, we find a statistically and...