Philly Fed paper on economic effects of fiscal uncertainty
A Philadelphia Federal Reserve paper, published on Tuesday, finds that fiscal volatility shocks have an adverse effect on economic activity that is comparable to the effects of a 25-basis point rise in the federal funds rate.
Jesús Fernández-Villaverde, Pablo Guerrón-Quintana, Keith Kuester and Juan Rubio-Ramírez, the paper's authors, study the effects of changes in uncertainty about future fiscal policy on aggregate economic activity. They note that several observers have argued the increase in
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