Based on a sample of 56 countries, we find that while fiscal policy in the G-7 countries appears to be broadly consistent with Barro's tax smoothing proposition, in developing countries government spending and taxes are highly procyclical (i.e., government spending rises and taxes fall during...

We examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007. Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for...

This paper analyzes the structural relationship between policies that distort resource allocation and long-ten growth. It first reviews briefly the Solow model in which steady-state growth depends only on exogenous technological change. Policy distortions do affect the rate of growth in the...

Using non-linear methods, we argue that existing estimates of government spending multipliers in expansion and recession may yield biased results by ignoring whether government spending is increasing or decreasing. In the case of OECD countries, the problem originates in the fact that, contrary...

The present paper argues that the correct experiment to evaluate the effects of a fiscal adjustment is the simulation of fiscal plans rather than of individual fiscal shocks. The simulation of the fiscal plans adopted by 16 OECD countries over a 30-year period supports the hypothesis that the...

A key question that has arisen during recent debates is whether government spending multipliers are larger during times when resources are idle. This paper seeks to shed light on this question by analyzing new quarterly historical data covering multiple large wars and depressions in the U.S. and...

We examine global dynamics under infinite-horizon learning in New Keynesian models where the interest-rate rule is subject to the zero lower bound. As in Evans, Guse and Honkapohja (2008), the intended steady state is locally but not globally stable. Unstable deflationary paths emerge after...

We analyze whether government spending multipliers differ by the sign of the shock. Using aggregate historical U.S. data, we apply Ben Zeev's (2020) nonlinear diagnostic tests and find evidence of nonlinearities in the impulse response functions of both government spending and GDP. We then...

This paper compares fiscal cyclicality across advanced and developing countries, geographic regions as well as income levels over 1960-2016 period, then identifies factors that explain countries' government spending and tax-policy cyclicality. Public debt/tax base ratio provides a more robust...

Many countries, especially developing ones, follow procyclical fiscal polices, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for...