This paper uses a DSGE model to examine the effects of an expansion in government spending in a liquidity trap. If the liquidity trap is very prolonged, the spending multiplier can be much larger than in normal circumstances, and the budgetary costs minimal. But given this "fiscal free lunch,"...

While popular wisdom holds that the United States should save more now in anticipation of the aging of the baby boom generation, the optimal response to population aging from a macroeconomic perspective is not clear-cut. Indeed, Cutler, Poterba, Sheiner, and Summers ("CPSS",1990) argued that the...

This overview examines conditions for reliable economic policy analysis based on econometric models, focusing on the econometric concepts of exogeneity, cointegration, causality, and invariance. Weak, strong, and super exogeneity are discussed in general; and these concepts are then applied to...