Yields on long-term municipal bonds reflect both current and expected future tax rates. This paper derives expected changes in tax rates from yields on short- and long-term municipal bonds and examines the relationship between expected changes in tax rates and the financial condition of the...

Remarks at Panel Discussion at 2012 U.S. Monetary Policy Forum, New York City.

Remarks at the Center for the New Economy 2010 Economic Conference, San Juan, Puerto Rico.

Cutting government spending on goods and services increases the budget deficit if the nominal interest rate is close to zero. This is the message of a simple but standard New Keynesian DSGE model calibrated with Bayesian methods. The cut in spending reduces output and thus—holding rates for...

Remarks at United States Military Academy at West Point, West Point, New York.

Remarks at the Council of Society Business Economists Annual Dinner, London, United Kingdom.

Eliminating the federal budget deficit, even assuming a correspondingly higher national rate, is likely to yield only a modest reduction in the U.S. international trade deficit. Balancing the federal budget will help improve the trade balance through the effects of lower levels of aggregate...

Remarks at the New Jersey Bankers Association Economic Forum, Iselin, New Jersey.

Tax cuts can deepen a recession if the short-term nominal interest rate is zero, according to a standard New Keynesian business cycle model. An example of a contractionary tax cut is a reduction in taxes on wages. This tax cut deepens a recession because it increases deflationary pressures....

The paper studies a fiscal policy instrument that can reduce fiscal distortions, without affecting revenues, in a politically viable way. The instrument is a private contract (tax buyout), offered by the government to each individual citizen, whereby the citizen can choose to pay a fixed price...