From the early 1950s to the early 1990s, increases in Social Security benefits in the United States varied widely in size and timing, and were only rarely undertaken in response to short-run macroeconomic developments. This paper uses these benefit increases to investigate the macroeconomic...

The key findings of the Czech Republic’s 2010 Article IV Consultation are discussed. Large foreign direct investment inflows fostered trade integration, underpinning an export-led expansion. Higher initial standard of living contained consumption convergence pressures. An improved fiscal...

This Selected Issues paper quantifies the macroeconomic effects of fiscal policy in Spain, focusing on the external sector. It describes the stylized facts of the Spanish economy and presents an econometric analysis. It examines Spain’s growth and productivity performance in relation to a...

We show that policy uncertainty about how the rising public debt will be stabilized empirically accounts for the lack of deflation in the US economy during the zero-lower-bound period. Announcing fiscal austerity is detrimental in the short run, but it preserves macroeconomic stability. On the...

We identify the major public debt overhang episodes in the advanced economies since the early 1800s, characterized by public debt to GDP levels exceeding 90% for at least five years. Consistent with Reinhart and Rogoff (2010) and other more recent research, we find that public debt overhang...

Every economy faces a "fiscal limit" that delivers the maximum government debt-GDP ratio that can be sustained without appreciable risk of default or higher inflation. But governments in advanced economies issue substantial nominal debt and nominal debt is a commitment to repay in nominal units....

The global economy has a chronic shortage of safe assets which lies behind many recent macroeconomic imbalances. This paper provides a simple model of the Safe Asset Mechanism (SAM), its recessionary safety traps, and its policy antidotes. Safety traps share many common features with...

We study cross-country insurance in a currency union with nominal price and wage rigidities. We provide two results that build the case for the creation of a fiscal union within a currency union. First, we show that, if financial markets are incomplete, the value of gaining access to any given...

Economists generally believe that countercyclical fiscal policies have stabilizing effects that work through automatic stabilizers and discretionary actions. Analyses underlying this conventional wisdom focus on intratemporal margins: how employment and personal income respond in the short run...

We quantify the fiscal multipliers in response to the American Recovery and Reinvestment Act (ARRA) of 2009. We extend the benchmark Smets-Wouters (2007) New Keynesian model, allowing for credit-constrained households, the zero lower bound, government capital and distortionary taxation. The...