Using non-linear methods, we argue that existing estimates of government spending multipliers in expansion and recession may yield biased results by ignoring whether government spending is increasing or decreasing. In the case of OECD countries, the problem originates in the fact that, contrary...

We contribute to the literature on tax multipliers by analyzing the pitfalls in identification and measurement of tax shocks. Our main focus is on disentangling the discussion regarding the identification of exogenous tax policy shocks (i.e., changes in tax policy that are not the result of...

Based on a sample of 104 countries, we document four key stylized facts regarding the interaction between capital flows, fiscal policy, and monetary policy. First, net capital inflows are procyclical (i.e., external borrowing increases in good times and falls in bad times) in most OECD and...

In the past, industrial countries have tended to pursue countercyclical or, at worst, acyclical fiscal policy. In sharp contrast, emerging and developing countries have followed procyclical fiscal policy, thus exacerbating the underlying business cycle. We show that, over the last decade, about...

It is well known by now that government spending has typically been procyclical in developing economies but acyclical or countercyclical in industrial countries. Little, if any, is known, however, about the cyclical behavior of tax rates (as opposed to tax revenues, which are endogenous to the...

A large empirical literature has found that fiscal policy in developing countries is procyclical, in contrast to high-income countries where it is countercyclical. The idea that fiscal policy in developing countries is procyclical has all but reached the status of conventional wisdom. This has...

This paper studies the social implications of fiscal policy responses to crises in Latin America over the last 40 years and in the Eurozone during the aftermath of the global financial crisis. We focus on the behavior of four social indicators: the poverty rate, income inequality, unemployment...

This paper analyzes the fiscal and monetary policy responses to crises in Latin America over the last 40 years. We argue that, on average, Latin American countries have "graduated" in terms of their policy responses in the sense that they have been able to switch from procyclical to...