We analyze the non-linear effects of government spending for the Euro area in recession, by using local projection method and by testing whether the impact of the shock depends crucially on the levels of public debt or the depth of the recession. We provide three insights. First, expenditure...

Using corpora of business cycle report sections dealing with monetary and fiscal policy issues from 1999 to 2017 and using methods of unsupervised text scaling (Slapin and Proksch, 2008; Lauderdale and Herzog, 2016), namely Wordfish and Wordshoal we scale the institutions' theoretical/ideological...

Der historisch einmalige Einbruch der gesamtwirtschaftlichen Leistungen in der Corona-Krise macht wirtschaftspolitische Maßnahmen dringend erforderlich. Wenn die Maßnahmen sich auf die Nachfrageseite richten, müssen sie mit dem richtigen Timing, zielgenau und befristet gestaltet sein. Die...

Consider a union of atomistic member states, each faced with idiosyncratic business-cycle shocks. Private cross-border risk-sharing is limited, giving a role to a federal unemployment-based transfer scheme. Member states control local labor-market policies, giving rise to a trade-off between...

Episodes of debt accumulation have been a recurrent feature of the global economy over the past fifty years. Since 2010, emerging and developing economies have experienced another wave of historically large and rapid debt accumulation. Similar past debt buildups have often ended in widespread...

The existing literature on fiscal policy has mainly employed linear models that found a small fiscal multiplier in developing economies. These findings challenge the importance and effectiveness of fiscal policy for these countries. However, linear models are not capable of distinguishing the...

This paper studies how investment tax incentives stimulate output in a medium-scale DSGE model, which allows for a variety of fiscal financing mechanisms. We find that the horizon following a positive shock in investment tax incentives is crucial. The shock is highly expansionary in the long...

We study the incidence and severity of lower-bound episodes and the efficacy of three types of state-dependent policies - forward guidance about the future path of interest rates, large-scale asset purchases and spending-based fiscal stimulus - in ameliorating the adverse consequences stemming...

This paper presents a framework for analysing the evolution of the structural government deficit estimated using the official EU methodology relevant for the Stability and Growth Pact. The focus of our framework lies in the analysis of the main driving forces of changes in estimated structural...

We provide evidence that industries' supply curves are convex. To guide our empirical analysis, we develop a model, in which capacity constraints at the plant level generate convex supply curves at the industry level. The industry's capacity utilization rate is a sufficient statistic for the...