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This paper uses the strategy and data of Blanchard and Perotti (BP) to identify fiscal shocks and estimate fiscal multipliers for the United States. With these results, it computes the cumulative multiplier of Ramey and Zubairy (2018), now common in the literature. It finds that, contrary to the peak and through multipliers reported by BP, the cumulative tax multiplier is much larger than the cumulative spending one. Hence, the conclusions depend on the definition of multiplier. This methodology is also used to estimate the effects of fiscal shocks on economic activity in eight Latin American countries. The results suggest that the fiscal multipliers vary significantly across countries, and in some cases multipliers are larger than previously estimated.

United States --- Econometrics --- Macroeconomics --- Public Finance --- Fiscal Policy --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- National Government Expenditures and Related Policies: General --- Taxation, Subsidies, and Revenue: General --- Econometrics & economic statistics --- Public finance & taxation --- Structural vector autoregression --- Expenditure --- Vector autoregression --- Revenue administration --- Fiscal multipliers --- Econometric analysis --- Fiscal policy --- Expenditures, Public --- Revenue

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This paper uses a DSGE model to examine whether including the exchange rate explicitly in the central bank's policy reaction function can improve macroeconomic performance. It is found that including an element of exchange rate smoothing in the policy reaction function is helpful both for financially robust advanced economies and for financially vulnerable emerging economies in handling risk premium shocks. As long as the weight placed on exchange rate smoothing is relatively small, the effects on inflation and output volatility in the event of demand and cost-push shocks are minimal. Financially vulnerable emerging economies are especially likely to benefit from some exhange rate smoothing because of the perverse impact of exchange rate movements on activity.

Finance --- Business & Economics --- Money --- Inflation (Finance) --- Anti-inflationary policies. --- Antiinflationary policies --- Government policy --- Economic policy --- Price regulation --- Natural rate of unemployment --- Foreign Exchange --- Inflation --- Investments: General --- Money and Monetary Policy --- Price Level --- Deflation --- Investment --- Capital --- Intangible Capital --- Capacity --- Monetary Policy --- Currency --- Foreign exchange --- Macroeconomics --- Monetary economics --- Exchange rates --- Return on investment --- Inflation targeting --- Real exchange rates --- Prices --- Saving and investment --- Monetary policy --- Singapore