Recent research and events have brought fiscal policy back into the spotlight. Fiscal Taylor rules and error correction models have represented two different ways of quantifying the feedbacks from fiscal and economic conditions to fiscal policy decisions. This paper synthesizes these two ideas,...

Rainy day funds (RDFs) are potentially an important countercyclical tool for states to stabilize their budgets and the overall economy during economic downturns. However, U.S. states have often found themselves exhausting their RDFs and having to raise tax rates or reduce expenditure while still...

Financial market crises with the threat of a subsequent debt-deflation depression have occurred with increasing regularity in the United States from 1980 through the present. Almost reflexively, when confronted with such circumstances, US institutions and the policymakers that run them have...

The purpose of this paper is to analyse whether fiscal policies can alleviate the effects of the zero lower bound (ZLB) on interest rates and if they should be coordinated internationally. The analysis is carried out using EAGLE, a DSGE model of the global economy. We consider that the fiscal...

Theory and evidence suggest that in an environment of well-anchored expectations, temporary news or shocks to economic variables, should not affect agents ́expectations of inflation in the long term. Our estimated structural VARs show that both long- and short-term inflation expectations are...

The debate about the use of fiscal instruments for macroeconomic stabilization has regained prominence in the aftermath of the Great Recession, and the experience of a monetary union equipped with fiscal shock absorbers, such as the United States, has often been a reference. This paper enhances...

We use a SVAR approach to the effects of fiscal and monetary policies, as well as their interactions (policy mix) for the US and the Euro Area (EMU). Overall, our results show that these two cases are different from each other. First, while in the case of the US there is evidence of Keynesian...