This paper estimates the effects of monetary policy on the UK economy based on a new, extensive real-time forecast data set. Employing the Romer–Romer identification approach we first construct a new measure of monetary policy innovations for the UK economy. We find that a 1 percentage point...

This paper estimates the effects of monetary policy on the UK economy based on a new, extensive real-time forecast data set. Employing the Romer Romer identification approach we first construct a new measure of monetary policy innovations for the UK economy. We find that a one percentage point...

This paper studies the impact of the state-dependent risk of a government default on the correlation of the scal balance and current account. We use a small open economy model where nonlinear risk premia arise endogenously when the government operates close to its scal limit, i.e. the maximum...

This paper estimates the importance of shocks to consumer misperceptions “noise shocks” for U.S. business cycle fluctuations. I embed imperfect information as in Lorenzoni (2009) into a Smets and Wouters (2007)-type DSGE model. Agents only observe aggregate productivity and a signal about...

This paper analyzes the impact of the government debt-to-GDP ratio on the correlation of the fiscal balance and the current account. Above a government debt-to-GDP ratio of 90 percent the correlation of the two balances decreases by 0.16 in a sample of 12 euro area countries and by 0.17 for...

Using a long span of expenditure survey data and a new narrative measure of exogenous income tax changes for the United Kingdom, we show that households with mortgage debt exhibit large and persistent consumption responses to changes in their income. Homeowners without a mortgage, in contrast,...

This paper provides new estimates of the macroeconomic effects of tax changes using a new narrative dataset for the United Kingdom. Identification is achieved by isolating ?exogenous? tax policy changes using the Romer and Romer narrative strategy. I find that a 1 percent cut in taxes increases...

The size and sign of the government spending multiplier crucially depends on how the spending is financed and how consumers respond to implied future tax increases. I investigate this issue in an estimated New Keynesian DSGE model with distortionary labor and capital taxes and, importantly, with...

The size and sign of the government spending multiplier crucially depends on how the spending is financed and how consumers respond to implied future tax increases. I investigate this issue in an estimated New Keynesian DSGE model with distortionary labor and capital taxes and, importantly, with...