Interest-rate spreads fluctuate widely across time and countries. We illustrate this on the basis of about 3,100 quarterly observations for 21 advanced and 17 emerging economies since the early 1990s. Prior to the financial crisis, spread fluctuations in advanced economies are an order of...

In economies with fixed exchange rates, the adjustment to government spending shocks is asymmetric. A fiscal expansion appreciates the real exchange rate but does not stimulate output. A fiscal contraction does not alter the exchange rate, but lowers output. We develop these insights in a...

Policy makers often implement austerity measures when the sustainability of public finances is in doubt and, hence, sovereign yield spreads are high. Is austerity successful in bringing about a reduction in yield spreads? We employ a new panel data set which contains sovereign yield spreads for...

Government spending shocks are frequently identi?ed in quarterly time-series data by ruling out a contemporaneous response of government spending to other macroeconomic aggregates. We provide evidence that this assumption may not be too restrictive for U.S. annual time-series data.

Economic nationalism is on the rise. What are the costs of cutting back international economic integration and rising policy uncertainty? We use the unexpected outcome of the Brexit vote in June 2016 as a natural macroeconomic experiment to study the costs of economic disintegration and their...

Policy makers often implement austerity measures when the sustainability of public finances is in doubt and, hence, sovereign yield spreads are high. Is austerity successful in bringing about a reduction in yield spreads? We employ a new panel data set which contains sovereign yield spreads for...