How does the output response to a change in government spending vary over the business cycle? What are the welfare effects of spending shocks? This paper studies the state-dependence of the output and welfare effects of shocks to government purchases in a DSGE model with real and nominal...

activity.

We document several important changes in the nature of economic fluctuations that coincide with the onset of the Great Moderation and the Jobless Recoveries phenomenon. Labor productivity turned from strongly procyclical to countercyclical; sectoral reallocation of labor increased and became...

There seems to be a widespread belief among economists, policy-makers, and members of the media that the “confidence” of households and firms is a critical component of the transmission of fiscal policy shocks into economic activity. In this paper we take this proposition to the data. We use...