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The Coronavirus Stimulus Package: How large is the transfer multiplier?

In response to the COVID-19 pandemic, large parts of the economy were locked down and, as a result, households' income risk rose sharply. At the same time, policy makers put forward the largest stimulus package in history. In the U.S., it amounted to …

Firm expectations about production and prices: Facts, determinants, and effects

This chapter revisits survey evidence about firm expectations, with a particular focus on firms' production and prices. We aim at synthesizing the evidence established on the basis of various firm surveys from different countries. We complement our …

Uncertainty-driven Business Cycles: Assessing the Markup Channel

Precautionary pricing and increasing markups in representative-agent DSGE models with nominal rigidities are commonly used to generate negative output effects of uncertainty shocks. We assess whether this theoretical model channel is consistent with …

Does Austerity Pay Off?

We investigate empirically how fiscal shocks—unanticipated and exogenous changes of government consumption growth—impact the sovereign default premium. For this purpose we assemble a new data set for 38 emerging and developed economies. It contains …

The Costs of Economic Nationalism: Evidence from the Brexit Experiment

Economic nationalism is on the rise, but at what cost? We study this question using the unexpected outcome of the Brexit vote as a natural macroeconomic experiment. Employing synthetic control methods, we first show that the Brexit vote has caused a …

Time-Varying Business Volatility and the Price Setting of Firms

Does time-varying business uncertainty/volatility affect the price setting of firms and in what way? We estimate from the micro data of the German ifo Business Climate Survey the impact of idiosyncratic volatility on the extensive margin of …

Risk Matters: The Real Effects of Volatility Shocks: Comment

We show that the risk-shock business cycle model of Fernández-Villaverde et al. (2011) must be recalibrated because it underpredicts the targeted business cycle moments by a factor of three once a time aggregation error is corrected. Recalibrating …

Policy Risk and the Business Cycle

The argument that uncertainty about monetary and fiscal policy has been holding back the recovery in the U.S. during the Great Recession has a large popular appeal. This paper uses an estimated New Keynesian model to analyze the role of policy risk …

Central Bank Communication on Financial Stability

Central banks regularly communicate about financial stability issues. This article asks how such communications affect financial markets, based on a unique dataset covering more than 1,000 releases of Financial Stability Reports (FSRs) and speeches …