While theoretical models consistently predict that government spending shocks should lead to appreciation of the domestic currency, empirical studies have been stubbornly finding depreciation. Using daily data on U.S. defense spending (announced and actual payments), we document that the dollar...

Using the TAXSIM model for the period 1962-95, we consider the federal tax system's impact as an automatic stabilizer. Despite the many changes in the tax system, there has been relatively little change in its role as an automatic stabilizer. We estimate that individual federal taxes offset...

In response to the record-breaking COVID19 recession, many governments have adopted unprecedented fiscal stimuli. While countercyclical fiscal policy is effective in fighting conventional recessions, little is known about the effectiveness of fiscal policy in the current environment with...

Firms respond to fluctuations in demand by changing their inventories and their levels of production. The relative magnitudes of the inventory and production responses have important implications for the overall cyclical behavior of the economy. Government policies that affect the costs of...

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...

In this paper, we estimate government purchase multipliers for a large number of OECD countries, allowing these multipliers to vary smoothly according to the state of the economy and using real-time forecast data to purge policy innovations of their predictable components. We adapt our previous...

This paper attempts to bring theoretical and empirical research on capital gains realization behavior closer together by considering whether investors who appear to engage more in strategic tax avoidance activity also respond differently to tax rates. We find that such investors exhibit...

This paper explores optimal fiscal policy in an overlapping-generations general-equilibrium model under uncertainty and the impact on optimal policy of the introduction of a type of policy stickiness intended to account for the stylized fact that major reforms happen infrequently. In general,...