We estimate the effect of temporary tax incentives on equipment investment using shifts in accelerated depreciation. Analyzing data for over 120,000 firms, we present three findings. First, bonus depreciation raised investment in eligible capital relative to ineligible capital by 10.4% between...

It is often argued that low tax rates on owner-occupied housing divert investment from equipment. This paper demonstrates that if people are heterogeneous in their propensity to save, and if there are constraints on borrowing, favorable tax treatment of owner-occupied housing up to a certain...

General purpose technologies (GPTs) such as AI enable and require significant complementary investments, including co-invention of new processes, products, business models and human capital. These complementary investments are often intangible and poorly measured in the national accounts, even...

Using data from the United Nations Comparison Project and the Penn World Table, we find that machinery and equipment investment has a strong association with growth: over l9&)?l95 each percent of GDP invested in equipment is associated with an increase in GDP growth of 1/3 a percentage point per...

Recent research on business investment decisions suggests that real investment in plant and equipment is quite sensitive to changes in the user cost of capital, pointing to the possibility that long-run changes in tax policy may have a significant impact on an economy's capital stock. Indeed,...

A sudden stop of capital flows into a developing country tends to be followed by a rapid switch from trade deficits to surpluses, a depreciation of the real exchange rate, and decreases in output and total factor productivity. Substantial reallocation takes place from the nontraded sector to the...

Macroeconomists have largely converged on method, model design, reduced-form shocks, and principles of policy advice. Our main disagreements today are about implementing the methodology. Some think New Keynesian models are ready to be used for quarter-to-quarter quantitative policy advice; we do...

We describe some of the main features of the recent vintage macroeconomic models used for monetary policy evaluation. We point to some of the key differences with respect to the earlier generation of macro models, and highlight the insights for policy that these new frameworks have to offer. Our...

Broadly defined, macroeconomic forecasting is alive and well. Nonstructural forecasting which is based largely on reduced-form correlations, has always been well and continues toquot; improve. Structural forecasting, which aligns itself with economic theory and hence rises andquot; falls with...

This paper develops a dynamic, life-cycle, general equilibrium model to study the interdependent demographic, fiscal, and economic transition paths of China, Japan, the U.S., and the EU. Each of these countries/regions is entering a period of rapid and significant aging requiring major fiscal...