We test whether the sharp increase in sovereign spreads of euro-area countries with respect to Germany after the explosion of the Greek crisis was due to deteriorating macroeconomic and fiscal fundamentals or to some form of financial contagion. Our analysis includes indicators of domestic and external imbalances which were mostly disregarded by previous studies, and distinguishes between inves...

Using the standard real business cycle model with lump-sum taxes, we analyze the impact of fiscal policy when agents form expectations using adaptive learning rather than rational expectations (RE). The output multipliers for government purchases are significantly higher under learning, and fall within empirical bounds reported in the literature (in sharp contrast to the implausibly low values ...

This paper incorporates the aging population projected by the U.S. Social Security Administration to a heterogeneous-agent OLG model with idiosyncratic wage shocks and analyzes its effects on individual households, the government budget, and the overall economy. The fiscal gap caused by the demographic change is 2.94% of GDP under the intermediate projection. The effect of the aging population ...

Using the standard real business cycle model with lump-sum taxes, we analyze the impact of fiscal policy when agents form expectations using adaptive learning rather than rational expectations (RE). The output multipliers for government purchases are significantly higher under learning, and fall within empirical bounds reported in the literature (in sharp contrast to the implausibly low values ...

This paper extends the recent empirical literature on the relationship between local decentralization and growth using data from both metropolitan and non-metropolitan regions in the U.S. The analysis utilizes both metropolitan and non-metropolitan regions, and thus avoids the possible selection bias present in previous research. The results for non-metropolitan regions indicate a relatively we...

This paper investigates the effects of fiscal policy on the trade balance using a structural factor model. A fiscal policy shock worsens the trade balance and produces an appreciation of the domestic currency but the effects are quantitatively small. The findings match the theoretical predictions of the standard Mundell-Fleming model, although fiscal policy should not be considered one of the m...

This paper contributes to the micro-foundation of money in centralized markets with idiosyncratic uncertainty. It shows existence of stationary monetary equilibria and ensures that there is an optimum quantity of money. The rational solution of our model is compared with actual behavior in a laboratory experiment. The experiment gives support to the theoretical approach. JEL classification: C73...

We add inside and outside money to the standard GEI model. If there enough gains to trade via money, then monetary equilibrium (ME) exists and money has positive value, even when GEI fails to exist. The nonexistence of GEI shows up as a liquidity trap in terms of the ME. In sharp contrast to GEI, the ME are generically determinate not only in terms of real, but also financial, variables. © 2003...

This article uses seasonal integration and co integration techniques to test the hypothesis of neutrality of money, using data from the Iranian economy. Seasonal data for the three variables of money supply, output and prices show that (increase in) money supply and the price level are co integrated at zero frequency, but one does not see such a relationship between (increase in) money supply a...