This paper finds that debt-financed government spending multipliers vary considerably depending on the location of the debt buyer. In a sample of 33 countries, we find that government spending multipliers are larger when government purchases are financed by issuing debt to foreign investors...

Using a novel rich dataset at the regional level, this paper provides new empirical evidence on the €fiscal transmission mechanism in the Eurozone. Our baseline estimates reveal a government spending relative output multiplier of 2.9, an employment multiplier of 1.9, and a cost per job...

This paper reviews and summarizes the literature on the complementary relationship between fiscal policy and monetary policy. We focus on four types of fiscal policy: (1) automatic stabilizers, (2) state-contingent non-discretionary fiscal policy, (3) discretionary fiscal stimulus and (4)...

We propose a framework of optimal monetary policy where debt sustainability may, or may not, be a relevant constraint for the central bank. We show analytically that in each environment the optimal interest rate path consists of a Taylor rule augmented with forward guidance terms. These terms...

This paper extends the identification of unanticipated changes in average federal corporate and personal income tax rates in the United States, as proposed in Mertens and Ravn (2013), to the end of 2019, and assesses their propagation to economies with tight links to the US economy. While cuts...

Using a novel regional database covering over 200 elections in several European countries, this paper provides new empirical evidence on the political consequences of fiscal consolidations. To identify exogenous reductions in regional public spending, we use a Bartik-type instrument that...

We present evidence on the open economy consequences of US fiscal policy shocks identified through proxy-instrumental variables. Tax shocks and government spending shocks that raise the government budget deficit lead to persistent current account deficits. In particular, the negative response of...

We present evidence on the open economy consequences of US fiscal policy shocks identified through proxy-instrumental variables. Tax shocks and government spending shocks that raise the government budget deficit lead to persistent current account deficits. In particular, the negative response of...

We estimate the effect of government spending shocks on the US economy with a time-varying parameter vector autoregression. The recent Great Recession period appears to be characterized by uniquely large impulse responses of output to fiscal shocks. Moreover, the particularity of this period is...

The fiscal consolidation efforts of Spain, Italy, and Portugal from 2010 to 2014 did not achieve their goal of reducing the debt-to-GDP ratio in any of the three countries. This Economic Bulletin examines why the spending cuts and tax increases, at times drastic, were unsuccessful and...