This paper explores the interaction between fiscal policy and unemployment. It develops a dynamic economic model in which unemployment can arise but can be mitigated by tax cuts and public spending increases. Such policies are fiscally costly, but can be financed by issuing government debt. In...

Robert Solow has criticized our 2006 Journal of Economic Perspectives essay describing "Modern Macroeconomics in Practice." Solow eloquently voices the commonly heard complaint that too much macroeconomic work today starts with a model with a single type of agent. We argue that modern...

As recently as two years ago there was a widespread consensus among economists that fiscal policy is not useful as a countercyclical instrument. Now governments in Washington and around the world are developing massive fiscal stimulus packages, supported by a wide range of economists in...

Theoretical advances in macroeconomics made in the last three decades have had a major influence on macroeconomic policy analysis. Moreover, over the last several decades, the United States and other countries have undertaken a variety of policy changes that are precisely what macroeconomic...