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Jel Classification:H50 

Working Paper
Fiscal Stimulus under Sovereign Risk

The excess procyclicality of fiscal policy is commonly viewed as a central malaise in emerging economies. We document that procyclicality is more pervasive in countries with higher sovereign risk and provide a model of optimal fiscal policy with nominal rigidities and endogenous sovereign default that can account for this empirical pattern. Financing a fiscal stimulus is costly for risky countries and can render countercyclical policies undesirable, even in the presence of large Keynesian stabilization gains. We also show that imposing austerity can backfire by exacerbating the exposure to ...
Working Papers , Paper 762

Working Paper
Fiscal Stimulus Under Sovereign Risk

The excess procyclicality of fiscal policy is commonly viewed as a central malaise in emerging economies. We document that procyclicality is more pervasive in countries with higher sovereign risk and provide a model of optimal fiscal policy with nominal rigidities and endogenous sovereign default that can account for this empirical pattern. Financing a fiscal stimulus is costly for risky countries and can render countercyclical policies undesirable, even in the presence of large Keynesian stabilization gains. We also show that imposing austerity can backfire by exacerbating the exposure to ...
International Finance Discussion Papers , Paper 1257

Working Paper
Incumbency Disadvantage in U.S. National Politics: The Role of Policy Inertia and Prospective Voting

We document that postwar U.S. national elections show a strong pattern of incumbency disadvantage": If the presidency has been held by a party for some time, that party tends to lose seats in Congress. We develop a model of partisan politics with policy inertia and prospective voting to explain this finding. Positive and normative implications of the model are explored.
Working Papers , Paper 17-43

Working Paper
Which Way to Recovery? Housing Market Outcomes and the Neighborhood Stabilization Program

To help communities recover from the foreclosure crisis, Congress enacted a set of policies known as the Neighborhood Stabilization Program (NSP). NSP's objective was to mitigate the impact of foreclosures on neighboring properties, through reducing the stock of distressed properties and removing sources of visual blight. This paper presents evidence on production outcomes achieved through the second round of NSP funding (NSP2), and discusses the housing market context under which the program operated from 2010 to 2013. Two key findings emerge. First, local grantees undertook quite different ...
Finance and Economics Discussion Series , Paper 2015-4

Working Paper
Place-Based Consequences of Person-Based Transfer: Evidence from Recessions

This paper studies how government transfers respond to changes in local economic activity that emerge during recessions. Local labor markets that experience greater employment losses during recessions face persistent relative decreases in per capita earnings. However, these areas also experience persistent increases in per capita transfers, which offset 16 percent of the earnings loss on average. The increase in transfers is driven by unemployment insurance in the short run, and medical, retirement, and disability transfers in the long run. Our results show that nominally place-neutral ...
Working Papers , Paper 22-08

Working Paper
The Nonlinear Effects of Fiscal Policy

We argue that the fiscal multiplier of government purchases is nonlinear in the size of the spending shock. In particular, the multiplier is increasing in the spending shock, with more expansionary government spending shocks generating larger multipliers and more contractionary shocks generating smaller multipliers. We document that empirically this holds true across time, countries and types of shocks. We then propose a neoclassical mechanism that hinges on the relationship between fiscal shocks, their form of financing, and the response of labor supply across the wealth distribution. A ...
Working Papers , Paper 2019-015

Working Paper
Assessing the evidence on neighborhood effects from moving to opportunity

Trying to learn about neighborhood effects from the Moving to Opportunity (MTO) housing mobility experiment by focusing on its program effects obfuscates the evidence on neighborhood effects from MTO. This paper shows that using Intent-to-Treat (ITT) and Treatment-on-the-Treated (TOT) program effects from MTO to indirectly draw conclusions about neighborhood effects (1) offers no advantage for learning about neighborhood effects over directly estimating neighborhood effects, and (2) answers an ill-posed question as a result of allowing central identifying assumptions to be made implicitly. ...
Working Papers (Old Series) , Paper 12-33R

Working Paper
The Nonlinear Effects of Fiscal Policy

We argue that the fiscal multiplier of government purchases is increasing in the size o the spending shock: more expansionary government spending shocks generate larger multipliers and more contractionary shocks generate smaller multipliers. We empirically document this pattern across time, countries, and modes of financing. We propose a neoclassical mechanism that hinges on the relationship between fiscal shocks, their form of financing, and the response of labor supply across the wealth distribution. An incomplete markets model predicts that the aggregate labor supply elasticity is ...
Working Papers , Paper 2019-015

Working Paper
Incumbency Disadvantage of Political Parties: The Role of Policy Inertia and Prospective Voting

We document that postwar U.S. elections show a strong pattern of ?incumbency disadvantage": If a party has held the presidency of the country or the governorship of a state for some time, that party tends to lose popularity in the subsequent election. To explain this fact, we employ Alesina and Tabellini's (1990) model of partisan politics, extended to have elections with prospective voting. We show that inertia in policies, combined with sufficient uncertainty in election outcomes, implies incumbency disadvantage. We find that inertia can cause parties to target policies that are more ...
Working Papers , Paper 19-7

Journal Article
Secular Stagnation and Monetary Policy

This article is based on the author?s Homer Jones Memorial Lecture delivered at the Federal Reserve Bank of St. Louis, April 6, 2016.
Review , Volume 98 , Issue 2

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