Showing 1 - 10 of 17
This paper analyzes the ability of a general equilibrium efficiency wage model to account for the estimated response of hours worked and of real wages to a fiscal policy shock. Our key finding is that the model cannot do so unless we make the counterfactual assumption that marginal tax rates are...
Persistent link: https://www.econbiz.de/10012471261
This paper investigates the response of real wages and hours worked to an exogenous shock in fiscal policy. We identify this shock with the dynamic response of government purchases and tax rates to an exogenous increase in military purchases. The fiscal shocks that we isolate are characterized...
Persistent link: https://www.econbiz.de/10012471317
Observed fiscal policy varies greatly across time and countries. How can we explain this variation across time and countries? This paper surveys the recent literature that has tried to answer this question. We adopt a unified approach in portraying public policy as the equilibrium outcome of an...
Persistent link: https://www.econbiz.de/10012471701
This paper reconsiders the degree to which macroeconomic stabilization is possible when the zero lower bound is a relevant constraint on the effectiveness of conventional monetary policy, under an assumption of bounded rationality. In particular, we reconsider the potential role of...
Persistent link: https://www.econbiz.de/10012481376
Standard discussions of flexible inflation targeting as an optimal monetary policy abstract completely from the consequences of monetary policy for the government budget. But at least some of the countries now adopting inflation targeting have substantial difficulty in controlling fiscal...
Persistent link: https://www.econbiz.de/10012466536
This paper demonstrates how time consistency of the Ramsey policy - the optimal fiscal and monetary policy under commitment - can be achieved. Each government should leave its successor with a unique maturity structure for the nominal and indexed debt, such that the marginal benefit of a...
Persistent link: https://www.econbiz.de/10012467597
In previous work (Eggertsson and Woodford, 2003), we characterized the optimal conduct of monetary policy when a real disturbance causes the natural rate of interest to be temporarily negative, so that the zero lower bound on nominal interest rates binds, and showed that commitment to a...
Persistent link: https://www.econbiz.de/10012467849
This paper investigates the nature of U.S. fiscal policy in the aftermath of 9/11. We argue that the recent dramatic fall in the government surplus and the large fall in tax rates cannot be accounted for by either the state of the U.S. economy as of 9/11 or as the typical response of fiscal...
Persistent link: https://www.econbiz.de/10012468263
We present a theoretical model of a parliamentary democracy, where party structures, government coalitions and fiscal policies are endogenously determined. The model predicts that, relative to proportional elections, majoritarian elections reduce government spending because they reduce party...
Persistent link: https://www.econbiz.de/10012468518
The paper presents empirical findings regarding the economic policy consequences of constitutional arrangements, in three different dimensions. First, the data are consistent with several theoretical predictions about the consequences of electoral rules and forms of government for fiscal policy...
Persistent link: https://www.econbiz.de/10012468524