This paper estimates a multi-instrument fiscal Taylor Rule for the United States. Taxes and purchases both respond strongly to deficits, while transfers do not. Taxes are procyclical; purchases are acyclical; and transfers are countercyclical. These estimates appear stable over time.

This paper documents the systematic response of postwar U.S. fiscal policy to fiscal imbalances and the business cycle using a multivariate Fiscal Taylor Rule. Adjustments to taxes and purchases both account for a large portion of the fiscal response to debt, while authorities seem reluctant to...

We quantify the fiscal multipliers in response to the American Recovery and Reinvestment Act (ARRA) of 2009. We extend the benchmark Smets-Wouters (Smets and Wouters, 2007) New Keynesian model, allowing for credit-constrained households, the zero lower bound, government capital and distortionary...

Recently governments, economists, and international financial institutions have been debating the merits of further fiscal stimulus to combat the Great Recession versus fiscal austerity or “adjustment” – that is, higher taxes and/or lower government spending – to combat budget deficits....

With the economy suffering from near double-digit unemployment, public debate is dominated by concerns over the budget deficit and national debt. This discussion is unfortunate both because there is no reason for people to be concerned about the deficit at present, and more importantly, because...

El propósito del presente documento es el de contribuir al debate en torno a la importancia de la política fiscal como una herramienta poderosa para la estabilización y el crecimiento económico, así como mostrar el hecho de que los déficits fiscales no son los responsables de la...

Not much cross-country evidence exists on the time-series behavior of individual fiscal instruments in response to the public debt and to output. To remedy this situation, this study provides a set of detailed estimated fiscal reaction functions (or “fiscal rules”) governing these responses...

This paper investigates nonlinearities in a quantity-based monetary policy rule for China within a New Keynesian DSGE model. Empirical results from Bayesian estimation show that the central bank of China has adopted a nonlinear quantity rule over the period of 1992Q1–2013Q3. Moreover, evidence...

The aim of this article is to assess the sustainability of fiscal policy in 18 developing and emerging countries, using the recursive algorithm developed by Croce and Juan-Ramón (2003). In general, the results suggest that most countries were identified as presenting large unsustainable fiscal...

Using the IMF’s “action-based” dataset, we show that budgetary consolidation under both the euro and other exchange rate regimes negatively affects GDP growth, while it raises unemployment. However, these effects are more pronounced under the euro.