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...

The current buildup of the U.S. Social Security Trust Fund has caused speculation about both the potential consequences of the buildup under different policy objectives and the fund's management. As is often the case, the search for precedents under similar circumstances abroad has been quite extensive on the part of legislators and U.S. experts in the field of financial policy. This article su...

The ability of voters to monitor government officials is complicated by the large changes in government spending caused by the business cycle. Voters may be uncertain about the cumulative effect of changes in spending that occur over several years, and thus budget allocations may be different from voters’ ideal. For the years 1989 through 2006, we examine states’ responses to revenue shocks, wh...

the aim of this paper is to investigate the existence of the new non-ricardian regime policy in iranian economy. we detected signs of the non-ricardian regime from quarterly data of 1369 to 1391. to investigate further a dynamic stochastic general equilibrium model is designed to estimate the fiscal and monetary parameters using a bayesian approach. our results indicated a passive monetary poli...

This paper revisits the traditional hierarchy of macroeconomic stabilization tools outside of the zero lower bound. In the benchmark New-Keynesian model monetary policy is always preferred to fiscal policy because fiscal policy has relative costs without delivering any relative benefits. I explore the robustness of this standard “monetary supremacy” result in three steps. First, motivated by em...

Introduction and summary A classic question facing macroeconomists is: How does an increase in government purchases affect the economy? Our interest in this question is motivated by the desire to evaluate the properties of different rules and institutions for setting fiscal policy. For example, should government purchases vary systematically over the business cycle? What would the macroeconomic...

This paper proposes an empirical framework to study the effects of a policy regime change defined as an unpredictable and permanent change in the policy parameters. In particular I show how to make conditional forecast and perform impulse response functions and counterfactual analysis. As an application, the effects of changes in fiscal policy rules in the US are investigated. I find that discr...

Fiscal stance may respond pro-cyclically to the business cycle... This chapter describes the extent to which fiscal policy has been a stabilising or destabilising influence on economic activity in the OECD area over the last two decades, and investigates some of the institutional factors which may have led to the observed outcome. The concerns motivating the chapter relate to the fact that disc...

This paper investigates the efficiency of monetary and fiscal policy in a twocountry general equilibrium model with monopolistic competition and wage stickiness. When monopoly distortions are completely eliminated, we find that under some conditions, stochastic government spending can affect the efficiency of global monetary policy rules that replicate the real allocations under flexible wages....

The dramatic change in aggregate fiscal policy in recent years has contributed to a shift from process rules to allocation rules in federal budgeting. Although the allocation rules inherent in formula budgeting seem to offer fairness in times of fiscal constraint, they actually impose arbitrary program-level budgets that reflect the peculiarities of baselines, accounting conventions, and time h...