Does the fiscal multiplier depend on the exchange rate regime? To address this question, we first estimate a panel vector autoregression (VAR) model on time-series data for OECD countries. We identify the effects of unanticipated government spending shocks in countries with fixed and floating...

This paper analyzes the interaction of financial frictions and non-convex adjustment costs. Non-convex adjustment costs imply that firm-level investment is lumpy. Firms invest infrequently but each investment is large. This allows financial variables to influence investment along two margins....