In earlier work we documented two episodes in which a sharp fiscal consolidation was associated with a surprisingly large expansion in private domestic demand. In this paper we draw on further evidence to investigate if and when fiscal policy changes can have such non-Keynesian effects. In the...

This paper is about the size of fiscal multipliers and the sources of recovery from the Great Depression. Its contributions begin with a new quarterly data set for the interwar period that allows development of a VAR model of the U. S. economy over the period 1920-41. The quarterly data...

This paper studies the institutional and political determinants of capital controls in a sample of 20 OECD countries for the period 1950<196>89. One of the most interesting results is that capital controls are more likely to be imposed by strong governments, which have a relatively `free' hand over...</196>

This paper adds a highly-leveraged financial sector to the Ramsey model of economic growth and shows that this causes the economy to behave in a highly volatile manner: doing this strongly augments the macroeconomic effects of aggregate productivity shocks. Our model is built on the financial...

Changes in firms’ investment expenditures are considered one of the primary channels through which energy price shocks are transmitted to the economy. It is widely believed that the response of business fixed investment to energy price increases differs from its response to energy price...

Fear of risk provides a rationale for protracted economic downturns. We develop a real business cycle model where investors with decreasing relative risk aversion choose between a risky and a safe technology that exhibit decreasing returns. Because of a feedback effect from the interest rate to...

Firms expect certain investment expenditures. Firms realize certain investment expenditures. The difference is an investment surprise. With the help of the IFO Investment Survey for the German manufacturing sector we measure firms’ (quantitative) investment expectations and firms’...

This paper develops a new analysis of the U. S. economy in the 1920s that is illuminated by contrasts with the 1990s, and it also re examines the causes of the Great Depression. In both the 1920s and the 1990s the acceleration of productivity growth linked to the delayed effects of previously...

In this article, we demonstrate that a small degree of stochastic variation in the depreciation rate of capital can greatly reduce the comovement between hours worked and labour productivity in a neoclassical growth model. The depreciation rate is modeled as a Markov process to place a strict...

This paper explores the dynamic behavior of investment and hiring within a unified framework, stressing their mutual dependence and placing the emphasis on their joint, forward-looking behavior. Using structural estimation in aggregate, private sector U.S. data, it shows that the model, which...