Ramey (2011a) and others argue that increases in government spending associated with wars and military build-ups constitute a good instrument for measuring the macroeconomic effects of fiscal shocks. We argue that this instrument has two important drawbacks: the composition of government...

Do shocks to government spending raise or lower consumption and real wages? Standard VAR identification approaches show a rise in these variables, whereas the Ramey-Shapiro narrative identification approach finds a fall. I show that a key difference in the approaches is the timing. Both...