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sovereign default premia, government consumption, and output. We find that whether austerity pays off depends on a) initial … premia in benign times. These findings pertain to the short run. Austerity always pays off in the long run, but particularly …
Persistent link: https://www.econbiz.de/10011168905
This paper analyzes the impact of strained government finances on macroeconomic stability and the transmission of fiscal policy. Using a variant of the model by Curdia and Woodford (2009), we study a 'sovereign risk channel' through which sovereign default risk raises funding costs in the...
Persistent link: https://www.econbiz.de/10011083641
We investigate the effects of fiscal policy surprises for US data, using vector autoregressions. We overcome the difficulties that changes in fiscal policy may manifest themselves in variables other than fiscal variables first and that fiscal variables may respond ‘automatically’ to business...
Persistent link: https://www.econbiz.de/10005124017
than in previous studies and using panel regressions, vector auto-regressions, and an analysis of large fiscal and external …
Persistent link: https://www.econbiz.de/10008468562
After the Global Financial Crisis a controversial rush to fiscal austerity followed in many countries. Yet research on … the effects of austerity on macroeconomic aggregates was and still is unsettled, mired by the difficulty of identifying … novel approach, we show that austerity is always a drag on growth, and especially so in depressed economies: a one percent …
Persistent link: https://www.econbiz.de/10011083942
This paper presents a simple macroeconomic model where government spending affects aggregate demand directly and indirectly, through an expectational channel. Prices are fully flexible and the model is static, so intertemporal issues play no role. There are three important elements in the model:...
Persistent link: https://www.econbiz.de/10011083612
We provide empirical evidence on the effects of tax liability changes in the United States. We make a distinction between "surprise" and "anticipated" tax shocks. Surprise tax cuts give rise to a large boom in the economy. Anticipated tax liability tax cuts are instead associated with a...
Persistent link: https://www.econbiz.de/10005497768
This paper studies the effectiveness of Euro Area (EA) fiscal policy, during the recent financial crisis, using an estimated New Keynesian model with a bank. A key dimension of policy in the crisis was massive government support for banks—that dimension has so far received little attention in...
Persistent link: https://www.econbiz.de/10011083686
Existing empirical estimates of US nationwide tax multipliers vary from close to zero to very large. Using narrative measures as proxies for structural shocks to total tax revenues in an SVAR, we estimate tax multipliers at the higher end of the range: around two on impact and up to three after...
Persistent link: https://www.econbiz.de/10011083694
We identify government spending news and surprise shocks using a novel identification based on the Survey of Professional Forecasters. News shocks lead to an increase of the interest rate, a real appreciation of US dollar and a worsening of the trade balance. The opposite is found for the...
Persistent link: https://www.econbiz.de/10011083743