Aging populations in advanced economies are placing ever-increasing demands on government spending in the form of old-age benefits. Economies that have promised substantially more benefits than they have made provision to finance are heading into a prolonged era of fiscal stress. Unresolved...

Monetary policy decisions tend to be based on systematic analysis of alternative policy choices and their associated macroeconomic impacts: this is science. Fiscal policy choices, in contrast, spring from unsystematic speculation, grounded more in politics than economics: this is alchemy. In...

Changes in fiscal policy typically entail two kinds of lags: the legislative lag--between when legislation is proposed and when it is signed into law--and the implementation lag--from when a new fiscal law is enacted and when it takes effect. These lags imply that substantial time evolves...

A key issue in current research and policy is the size of fiscal multipliers when the economy is in recession. We provide three insights. First, using regime-switching models, we find large differences in the size of spending multipliers in recessions and expansions with fiscal policy being...

Recent fiscal policies, including the 2008 stimulus payments and the 2009 Making Work Pay tax credit, aimed to increase household spending. This paper quantifies the spending response to these policies and examines differences in spending by whether the stimulus was delivered as a one-time...

Bayesian prior predictive analysis of five nested DSGE models suggests that model specifications and prior distributions tightly circumscribe the range of possible government spending multipliers. Multipliers are decomposed into wealth and substitution effects, yielding uniform comparisons...

This paper shows how the richer frequency and variety of fiscal policy shocks available in an international sample can be analyzed recognizing the heterogeneity that exists across different countries. The main conclusion of our empirical analysis is that the question "what is the fiscal policy...

We do not have a good measure of the effects of fiscal policy in a recession because the methods that we use to estimate the effects of fiscal policy -- both those using the observed outcomes following different policies in aggregate data and those studying counterfactuals in fitted model...

The American Recovery and Reinvestment Act (ARRA) was the US government's fiscal response to the Great Recession. An important component of ARRA's $796 billion proposed budget was $318 billion in fiscal assistance to state and local governments. We examine the historical experience of federal...

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 multipliers from observational data. This paper...