7Does scal policy have large and qualitatively dierent eects on the economy when the nominal interest rate is zero? An emerging consensus in the New Keynesian (NK) literature is that the answer to this question is yes. Evidence presented here suggests that the NK model's implications for scal policy at the zero bound may not be all that dierent from its implications for policy away from it. For a range of empirically relevant parameterizations, employment increases when the labor tax rate is cut and the government purchase multiplier is less than 1.05. $$We thank Ricardo Reis, the editor, and the referees for their very helpful comments. This paper has also beneted from comments from seminar participants at Australian National University, the Bank of Japan,

Firms’ expectations play a central role in modern macroeconomic models, but little is known empirically about them. Using panel data on manufacturing firms’ expectations about prices and wage rates, new orders, employment and unit costs for the United Kingdom, we document a range of stylised facts about firms’ expectations and their determinants. There is wide dispersion of expectations across firms. Firms' expectations are influenced by both firm-specific factors and macroeconomic factors. We find a significant connection between past expected price and wage increases and their out-turns. Firms’ expectations are, however, clearly not rational.

Summary What is the effect of funding costs on the conditional probability of issuing a corporate bond? We study this question in a novel dataset covering 5610 issuances by US firms over the period from 1990 to 2014. Identification of this effect is complicated because of unobserved, common shocks such as the global financial crisis. To account for these shocks, we extend the common correlated effects estimator to settings where outcomes are discrete. Both the asymptotic properties and the small‐sample behavior of this estimator are documented. We find that for non‐financial firms yields are negatively related to bond issuance but that the effect is larger in the pre‐crisis period.