Government spending shocks are frequently identi?ed in quarterly time-series data by ruling out a contemporaneous response of government spending to other macroeconomic aggregates. We provide evidence that this assumption may not be too restrictive for U.S. annual time-series data.

In this paper we analyze European business cycles before and under EMU. Across the two periods we ?nd 1) a signi?cant decline in real exchange rate volatility, 2) signi?cant changes in cross-country correlations, and 3) the volatility of macroeconomic fundamentals largely un- changed. We develop...