This paper investigates the effects of government spending on the real exchange rate and the trade balance in the US using a new VAR identification procedure based on spending forecast revisions. I find that the real exchange rate appreciates and the trade balance deteriorates after a government spending shock, although the effects are quantitatively small. The findings broadly match the theore...

A growing literature relies on natural experiments to establish causal effects in macroeconomics. In diverse applications, natural experiments have been used to verify underlying assumptions of conventional models, quantify specific model parameters, and identify mechanisms that have major effects on macroeconomic quantities but are absent from conventional models. We discuss and compare the us...

A Markov switching position dependent random map is a random map of a finite number of measurable transformations where the probability of switching from one transformation to another is controlled by a position dependent irreducible stochastic matrix W . Existence of absolutely continuous invariant measures (acim) for a Markov switching position dependent random map was proved in [1] using spe...

Social values shape policy outcomes. We examine the role of postmaterialism, a widely used concept in the social sciences, for the mix of capital and labour taxation chosen by a society. Following political scientist Inglehart, we define the degree of postmaterialism as the relative importance which individuals or a society as a whole ascribe to non-material values over material things. We inco...

This paper investigates the relevance of government purchasing behavior for innovationbased economic growth. We construct a parsimonious Schumpeterian growth model in which demand from the public sphere can effectively alter the economy’s rate of technological change. We incorporate results of various empirical studies arguing that public sector demand acts as incentive for private innovation a...

Partisanship of state governors affects the efficacy US federal fiscal policy. Using close election data, we find partisan differences in marginal propensity to spend intergovernmental transfers: Republican less than Democratic governors. Correspondingly, Republican-led states have lower debt, (delayed) taxes, and initially economic activity. A New Keynesian model a monetary union implies sizab...

Using a rich data set on government spending forecasts, we estimate the effects of unexpected government spending both when the nominal interest rate is near zero lower bound (ZLB) and outside of the ZLB period in Japan. The output multiplier is 1.5 on impact in the ZLB period, while it is 0.7 outside of the ZLB period. We estimate that the government spending shocks increase both private consu...

This paper studies the impact of tax-financed universal health coverage schemes on macroeconomic aspects of labor supply, asset holding, inequality, and welfare, while taking into account features common to developing economies, such as informal employment and tax avoidance, by constructing a dynamic stochastic general equilibrium model with heterogeneous agents. Agents have different education...

It is often argued that implicit taxation on continued activity of elderly workers is responsible for the widely observed trend towards early retirement. In a world of laissez-faire or of first-best efficiency, there would be no such implicit taxation. The point of this paper is that when first-best redistributive instruments are not available, because some variables are not observable, the opt...

Global Aging and Fiscal Policy with International Labor Mobility: A Political Economy Perspective This paper uses an overlapping generations model with international labor mobility and a politically responsive fiscal policy to examine aging in developed and developing regions. Migrant workers change the political structure composed of young and elderly voters in both labor-receiving and labor-s...