Recent evidence on the effect of government spending shocks on consumption cannot be easily reconciled with existing optimizing business cycle models. We extend the standard New Keynesian model to allow for the presence of rule-of-thumb (non-Ricardian) consumers. We show how the interaction of...

This paper explores the quantitative link between export-promoting commercial policies and economic growth. We build and calibrate a dynamic general equilibrium model of a small developing economy. The economy's equilibrium is suboptimal due to monopolistic competition in the manufacturing...

We extend the Hansen and Prescott (1991) method for the numerical computation of equilibria of dynamic business cycle models in which there are two sets of agents who play a dynamic Stackelberg game. Such models have application to analysis of issues of optimal government policy in which the...

We build a simple dynamic model of the business cycle with monopolistically competitive firms. With simple assumptions concerning firm entry and exit, the model can explain some important stylised facts of the business cycle which standard real business cycle models with perfect competition...

Ce texte propose une revue des développements récents de la littérature macroéconomique inspirée de l'approche des modèles du cycle réel via l'introduction de différentes facettes de l'activité gouvernementale. A l'aide d'un modèle typique du cycle réel avec gouvernement, nous...

Recent evidence suggests that consumption rises in response to an increase in government spending. That finding cannot be easily reconciled with existing optimizing business cycle models. We extend the standard new Keynesian model to allow for the presence of rule-of-thumb consumers. We show how...

We examine the role of expectations in the Great Moderation episode. We derive theoretical restrictions in a New-Keynesian model and test them using measures of expectations obtained from survey data, the Greenbook and bond markets. Expectations explain the dynamics of inflation and of interest...

This paper characterizes the dynamic effects of shocks in government spending and taxes on economic activity in the United States in the post-war period. It does so by using a mixed structural VAR/event study approach. Identification is achieved by using institutional information about the tax...

We provide evidence on the dynamic effects of tax liability changes in the United States. We distinguish between surprise and anticipated tax changes. Preannounced but not yet implemented tax cuts give rise to contractions in output, investment, and hours worked while real wages increase. There...

Balanced budget requirements lead to substantial pro-cyclicality in state government spending, with the stringency of a state's rules driving the pace at which it must adjust to shocks. We show that fiscal institutions can generate natural experiments in deficit-financed spending that are...