Farmer, Waggoner, and Zha (2009) (FWZ) show that a new Keynesian model with regime-switching monetary policy can support multiple solutions, appearing to contradict findings in Davig and Leeper (2007) (DL). The explanation is straightforward: FWZ derive solutions using a model that differs from...

Increases in government spending trigger substitution effects - both inter- and intra-temporal - and a wealth effect. The ultimate impacts on the economy hinge on current and expected monetary and fiscal policy behavior. Studies that impose active monetary policy and passive fiscal policy...

Effects of government investment are studied in an estimated neoclassical growth model. The analysis focuses on two dimensions that are critical for understanding government investment as a fiscal stimulus: implementation delays for building public capital and expected fiscal adjustments to...

A rational expectations framework is developed to study the consequences of alternative means to resolve the "unfunded liabilities" problem--unsustainable exponential growth in federal Social Security, Medicare, and Medicaid spending with no plan to finance it. Resolution requires specifying a...

Effects of government investment are studied in an estimated neoclassical growth model. The analysis focuses on two dimensions that are critical for understanding government investment as a fiscal stimulus: implementation delays for building public capital and expected fiscal adjustments to...

We use a rational expectations framework to assess the implications of rising debt in an environment with a "fiscal limit". The fiscal limit is defined as the point where the government no longer has the ability to finance higher debt levels by increasing taxes, so either an adjustment to fiscal...

Increases in government spending trigger substitution effects--both inter- and intra-temporal--and a wealth effect. The ultimate impacts on the economy hinge on current and expected monetary and fiscal policy behavior. Studies that impose active monetary policy and passive fiscal policy...

in both a simple analytic model, where news shocks overcome the ``dynamic inconsistencies" documented in Estrella and Fuhrer (2002), and in a model that incorporates many of the real rigidities common to DSGE models. The paper calls for more thoughtful modeling of how information about...

Fiscal foresight---the phenomenon that legislative and implementation lags ensure that private agents know the tax rates they face in the future---is intrinsic to the tax policy process. Although acknowledged in empirical work, theoretical analysis of its implications is scant. This paper...