The paper studies the short-run, transitional, and long-run output effects of permanent and temporary shocks in public consumption under various financing methods. To this end, a dynamic macroeconomic model for a closed economy is developed, which features a perfectly competitive final goods...

This paper builds models of nonlinear dynamics in the aggregate investment and borrower net worth and uses them to study the causes and nature of endogenous credit cycles. The basic model has two types of projects: the Good and the Bad. The Bad is highly productive, but, unlike the Good, it...

Can a large-scale defcit spending program speed up recovery after recession? To answer that question we calibrate a standard neoclassical growth model with US data and assume that an exogenous shock has driven aggregate output far below steady-state level. We calibrate the model such that a...

In response to the financial and economic crisis, central banks, unlike in the 1930s, have created enormous amounts of money. There are fears that this will lead to inflation, but it is base money (the central bank's liabilities) that has expanded; total monetary aggregates have not. By contrast,...

The endorsement of expansionary fiscal packages has often been based on the idea that large multipliers can contrast rising unemployment. Is that really the case? We explore those issues in a New Keynesian model in which unemployment arises because of matching frictions. We compare fiscal...

This paper analyzes the effects of fiscal policy in Italy by employing a database containing two statistical novelties: quarterly fiscal variables on accrual basis and a time series estimate of tax evasion for the period 1981:1-2006:4. Following Revenue Agency suggestions, we use in a VECM the...

Towards the end of 2009, the world economy was recovering from its deepest recession since the end of World War II. Most countries around the world took resort to fiscal policy in order to foster this recovery. In this paper, we first discuss the pros and cons of discretionary fiscal policy from...

Several contributions have recently assessed the size of fiscal multipliers both in RBC models and New Keynesian models. None of the studies considers a model with frictional labour markets which is a crucial element, particularly at times in which much of the fiscal stimulus has been directed...

The paper studies the macroeconomic effects of government spending shocks in an economy characterized by positive trend growth. It shows that the lower is the trend growth rate the less inflationary are government spending shocks and vice versa. Moreover, on impact output is higher but exhibits...

This paper studies the relationship between export policy and food prices. We show that, when individuals are loss averse, food exporters may use trade policy to shield the domestic economy from large price shocks. This creates a complementarity between the price of food in international markets...