Local and Aggregate Fiscal Policy Multipliers
In: FRB St. Louis Working Paper No. 2016-4
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In: FRB St. Louis Working Paper No. 2016-4
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Working paper
In: Journal of Monetary Economics, Band 92, S. 16-30
In: ZEI Policy Paper, B98-01
World Affairs Online
In: 2018 Annals of Spiru Haret University. Economic Series, Band 18(3), Heft 81-95
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In: Journal of economic studies, Band 2, Heft 2, S. 100-113
ISSN: 1758-7387
The objective in this paper is to review several theoretical issues associated with fiscal policy and to test these theories via a reduced form real GNP equation using quarterly U.S. data from 1958 through 1966. Theoretical work by Friedman, Holmes and Smith, and others suggest (for different reasons) that fiscal policy may be ineffective. Holmes and Smith point out that increases in taxes may conceivably increase aggregate demand if the demand for money depends on disposable income. Higher taxes shift the IS curve to the left as usual. However, higher taxes reduce disposable income and decrease the demand for money. With a constant money supply, the LM curve shifts to the right and the lower equilibrium interest rate increases aggregate demand. The net effect of the opposite shifts in IS & LM could conceivably be an increase in income. Similarly, lower taxes may conceivably lower equilibrium income. The argument of Friedman and others runs along different lines. They emphasize that any change in government expenditure or change in taxes may temporarily alter real income, but any "pure" fiscal policy must be accompanied by a change in government debt. The larger debt that accompanies a fiscal expansion raises interest rates and eventually reduces private demand. The fiscal expansion can allegedly "crowd out" private expenditure completely so that the net long run effect on real income is zero.
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In: FRB Atlanta Working Paper No. 2019-9
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Working paper
In: PIER Working Paper No. 19-016 (2019)
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Working paper
In: CEPR Discussion Paper No. DP13950
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Working paper
We develop a quantitative business cycle model with search complementarities in the inter-firm matching process that entails a multiplicity of equilibria. An active equilibrium with strong joint venture formation, large output, and low unemployment coexists with a passive equilibrium with low joint venture formation, low output, and high unemployment. Changes in fundamentals move the system between the two equilibria, generating large and persistent business cycle fluctuations. The volatility of shocks is important for the selection and duration of each equilibrium. Sufficiently adverse shocks in periods of low macroeconomic volatility trigger severe and protracted downturns. The magnitude of government intervention is critical to foster economic recovery in the passive equilibrium, while it plays a limited role in the active equilibrium.
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In: IMF Working Papers
Though many aspects of Russia's fiscal policy framework are close to best practice on paper, actual practice in recent years has been moving away from best practice. In particular, the continued focus on the overall rather than the nonoil balance, and the regular use of supplemental budgets to spend windfall oil revenues contribute to procylicality of fiscal policy, risking costly boom-bust cycles. Against this background, this paper suggests several improvements to the framework for fiscal policy
We provide a theory of truncation for incomplete insurance-market economies with aggregate shocks, which is shown to be a consistent representation of standard incomplete-market economies. This representation allows deriving optimal policies with capital and aggregate shock. We apply this framework to an economy where the government can use capital and labor taxes, positive transfers and public debt to smooth aggregate shocks. The average capital tax is shown to be positive if and only if credit constraints are binding for some households. In a quantitative exercise, the capital tax appears to be more volatile than the labor tax and public debt is countercyclical and mean-reverting.
BASE
We provide a theory of truncation for incomplete insurance-market economies with aggregate shocks, which is shown to be a consistent representation of standard incomplete-market economies. This representation allows deriving optimal policies with capital and aggregate shock. We apply this framework to an economy where the government can use capital and labor taxes, positive transfers and public debt to smooth aggregate shocks. The average capital tax is shown to be positive if and only if credit constraints are binding for some households. In a quantitative exercise, the capital tax appears to be more volatile than the labor tax and public debt is countercyclical and mean-reverting.
BASE
We provide a theory of truncation for incomplete insurance-market economies with aggregate shocks, which is shown to be a consistent representation of standard incomplete-market economies. This representation allows deriving optimal policies with capital and aggregate shock. We apply this framework to an economy where the government can use capital and labor taxes, positive transfers and public debt to smooth aggregate shocks. The average capital tax is shown to be positive if and only if credit constraints are binding for some households. In a quantitative exercise, the capital tax appears to be more volatile than the labor tax and public debt is countercyclical and mean-reverting.
BASE
In: https://ora.ox.ac.uk/objects/uuid:34f674bf-588a-4a30-9acb-8c6e726733f0
We develop a quantitative business cycle model with search complementarities in the inter-firm matching process that entails a multiplicity of equilibria. An active static equilibrium with strong joint venture formation, large output, and low unemployment can coexist with a passive static equilibrium with low joint venture formation, low output, and high unemployment. Changes in fundamentals move the system between the two static equilibria, generating large and persistent business cycle fluctuations. The volatility of shocks is important for the selection and duration of each static equilibrium. Sufficiently adverse shocks in periods of low macroeconomic volatility trigger severe and protracted downturns. The magnitude of government intervention is critical to foster economic recovery in the passive static equilibrium, while it plays a limited role in the active static equilibrium.
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