This paper provides evidence on the effect of fiscal stimulus on economic activity in countries with different degrees of institutional quality. The identification strategy makes use of data on military expenditure to instrument government consumption using local lineal projections as presented...

Using vector autoregressions on U.S. time series for 1957-1979 and 1983-2004, we find government spending shocks to have stronger effects on output, consumption, and wages in the earlier sample. We try to account for this observation within a DSGE model featuring price rigidities and limited...