We postulate a nonlinear DSGE model with a financial sector and heterogeneous households. In our model, the interaction between the supply of bonds by the financial sector and the precautionary demand for bonds by households produces significant endogenous aggregate risk. This risk induces an...

We analyze the interaction between fiscal consolidation and private-sector deleveraging in an economy within a monetary union. Pre-existing long term collateralized private debt – a core ingredient of the deleveraging process – plays a critical role in shaping fiscal multipliers. By...

This paper studies the differences between fiscal multipliers in OECD economies across the credit cycle. Impulse responses are obtained using a state-dependent model with direct projections, in which multipliers depend on the state of credit markets. Identification of the effects of fiscal...

We study the size of fiscal multipliers in response to a government spending shock under different household leverage conditions in a general equilibrium setting with search and matching frictions. We allow for different levels of household indebtedness by changing the intensive margin of...

We show that several shocks identified without restrictions from a model, and frequently used in the empirical literature, display some persistence. We demonstrate that the two leading methods to recover impulse responses to shocks (moving average representations and local projections) treat...

The issue of the size of fiscal spillovers in the euro area has gained prominence recently, given proposals to coordinate fiscal policies that aim at achieving an appropriate “aggregate fiscal stance”, consistent with economic and monetary policy conditions. Given the heterogeneous fiscal...

This paper estimates the GDP impact of legislated tax changes in Spain using a newly constructed narrative record for the period 1986-2015. Our baseline estimates suggest that a 1% of GDP increase in exogenous taxes depresses output by around 1.3% after one year, this negative effect fading away...

This paper estimates the impact of government spending shocks on economic activity during periods of high and low uncertainty and during periods of boom and recession. We find that government spending shocks have larger impacts on output in booms than in recessions and larger impacts during...

We study simple fiscal rules for stabilizing the government debt level in response to asymmetric demand shocks in a country that belongs to a currency union. We compare debt stabilization through tax rate adjustments with debt stabilization through expenditure changes. While rapid and flexible...

Saudi Arabia Is the largest player In the world oil market. It maintains ample spare capacity, restricts investment in developing reserves, and its output is negatively correlated with other OPEC producers. While this behavior does not fit into the perfect competition paradigm, we show that it...