Darden School of Business
University of Virginia
Charlottesville, VA 22906
Institutional Affiliation: University of Virginia
Information about this author at RePEc
NBER Working Papers and Publications
|January 2020||Effects of Fiscal Policy on Credit Markets|
with Alan J. Auerbach, Yuriy Gorodnichenko: w26655
Credit markets typically freeze in recessions: access to credit declines and the cost of credit increases. A conventional policy response is to rely on monetary tools to saturate financial markets with liquidity. Given limited space for monetary policy in the current economic conditions, we study how fiscal stimulus can influence local credit markets. Using rich geographical variation in U.S. federal government contracts, we document that, in a local economy, interest rates on consumer loans decrease in response to an expansionary government spending shock.
|October 2019||Macroeconomic Frameworks|
with Alan J. Auerbach, Yuriy Gorodnichenko: w26365
We link detailed data on defense spending, wages, hours, employment, establishments, and GDP across U.S. cities to study the effects of fiscal stimulus. Our small-open-economy empirical setting permits us to estimate key macroeconomic outcomes and elasticities, including the responses of the labor share and the labor wedge to demand shocks and the elasticity of output with respect to labor inputs. We also decompose changes in work hours into different margins (hours per worker, the employment rate, and the labor force) and examine effects on local rental prices, wages, and firm entry. We compare our findings with the predictions of macroeconomic models and propose modifications to existing theory that can accommodate our findings.
|January 2019||Local Fiscal Multipliers and Fiscal Spillovers in the United States|
with Alan J. Auerbach, Yuriy Gorodnichenko: w25457
We estimate local fiscal multipliers and spillovers for the United States using a rich dataset based on U.S. Department of Defense contracts and a variety of outcome variables relating to income and employment. We find strong positive spillovers across locations and industries. Both backward linkages and general equilibrium effects (e.g., income multipliers) contribute to the positive spillovers. Geographical spillovers appear to dissipate fairly quickly with distance. Our evidence points to the relevance of Keynesian-type models that feature excess capacity.