This paper studies how fiscal policy affects credit market conditions. First, it conducts a FAVAR analysis showing that the credit spread responds negatively to an expansionary government spending shock, while consumption, investment, and lending increase. Second, it illustrates that these...

In addition to containing stable information to explain inflation, state-local expenditures have also a larger share of the forecast error variance of US inflation than the Federal funds rate. Non-defense federal expenditures are useful in predicting real output variations and, starting from the...

In this paper we explore the information content of a large set of fiscal indicators for US real output growth and inflation. We provide evidence that fluctuations in certain fiscal variables contain valuable information to predict fluctuations in output and prices. The distinction between...

We apply graphical modelling theory to identify fiscal policy shocks in SVAR models of the US economy. Unlike other econometric approaches of which achieve identification by relying on potentially contentious a priori assumptions of graphical modelling is a data based tool. Our results are in...