"Some economists argue that the neoclassical growth model cannot account for the macroeconomic effects of big fiscal shocks. This paper reassesses this view. We test the theory using data from World War II, which is by far the largest fiscal shock in the history of the United States. We take...

We study the behavior of output, employment, consumption, and investment in Germany during the Great Depression of 1928-37. In this time period, real wages were countercyclical, and productivity and fiscal policy was procyclical. We use the neoclassical growth model to investigate how much these...

This paper studies the effects of fiscal policies -- depicted as stochastic changes in government spending and distortionary tax rates -- when the government cannot use lump sum taxes to achieve intertemporal budget balance. This framework contrasts the more standard analysis in which spending...