FACULTY OF SOCIAL AND HISTORICAL SCIENCES

Professor Morten Ravn (Department of Economics)

Morten holds the position of Chair of Macroeconomics and is also the Head of Department of Economics at University College London. He holds a PhD in Economics from the University of Southampton. He has been elected a member of the Council of the European Economic Association, serves as an associate editor of the Journal of the European Economic Association, and is a Research Fellow of the CEPR. He arrived at UCL in 2009 prior to which he has held positions at the European University Institute, at London Business School, Universitat Pompeu Fabra, University of Southampton and at the University of Aarhus. His academic work has been concerned with macroeconomic theory, quantitative and applied macroeconomics, and international macroeconomics. Most recently he has worked on fiscal policy and on theories of macroeconomic booms and crises. His work has been published in journals such as the American Economic Review, American Economic Journal, Economic Journal, International Economic Review, Journal of Monetary Economics, Quarterly Journal of Economics, Review of Economic Dynamics, Review of Economic Studies, Review of Economics and Statistics and many others.

Title: Some Macroeconomics of Fiscal Policy

The Great Recession has witnessed a surge of interest in the macroeconomic aspects of fiscal policy, an area that over the preceding 2 decades had received very little attention by macroeconomists and by policymakers. This new trend has been driven by a number of factors but perhaps most importantly from the fact that the very low nominal interest rates that were implemented by central banks quite early on in the recession led to a search for alternative policy instruments amongst which fiscal policy was the most obvious. Moreover, it has by now become clear that fiscal policy expansions may produce debt concerns even for countries that previously were thought of as having little reason to be concerned about fiscal sustainability. The new interest in the area relates both to the empirics on the impact of fiscal policy and to positive and normative theories of fiscal policy. In this talk I will address issues related to anticipation effects of fiscal policy, the identification of fiscal policy interventions and the measurement of their impact. It will be proposed that changes in taxes have important macroeconomic effects but that it is extremely important to distinguish between instruments and to control appropriately for endogeneity of policy instruments. I will also examine macroeconomic theories of fiscal policy and argue that it is key to properly model the extent to which taxes impact on incentives to work and save and to model heterogeneity across agents and the degree to which agents are able to insure against idiosyncratic risk.