The ‘saving for a rainy day' hypothesis implies that households' saving decisions reflect that they can (rationally) predict future income declines. The empirical relevance of this hypothesis plays a key role in discussions of fiscal policy multipliers and it holds under the null that the...

The ‘saving for a rainy day' hypothesis implies that households' saving decisions reflect that they can (rationally) predict future income declines. The empirical relevance of this hypothesis plays a key role in discussions of fiscal policy multipliers and it holds under the null that the...

Long shunned as slow and ill timed, the response to the Covid-19 pandemic initiated a reassessment of fiscal policy as stabilisation tool. At the same time, there is ample evidence that major economic downturns produce lasting effects on real GDP in spite of active fiscal policy interventions....

Unlike the narrative in Walrasian economic theory, the real world is not one of perfect foresight. This paper replaces this axiom with fundamental uncertainty, as established in original Keynesian theory. Drawing on contributions from Shackle, Okun, Alchian and Davidson, this paper explores how...

In 2009, Germany invested 15.4 Billion Euro in infrastructure to avert the looming recession. In this study, we evaluate whether the German stimulus program was successful in limiting the impact of the crisis on the job market. We exploit exogenous cross-sectional variation to identify the...

This paper examines the optimal reaction of fiscal policy to permanent and transitory shocks to output in a model of tax and public consumption smoothing. The model predicts that optimal reaction of public expenditures and deficits to transitory shocks should be counter cyclical, while optimal...

This study used the Bayesian methodology to estimate and calibrate a small-scale DSGE model of the Philippines. The goal of this study was to review the risk associated with increases in sovereign deficits. The major results of the study are: Estimates of fiscal rules show that fiscal authority...