This paper studies the response of firms’ research and development (R&D) expenditure to monetary policy shocks in the US economy. I show that a 20-basis-point increase in the policy interest rate reduces aggregate R&D spending by about 0.6 percent, leading to a delayed decline in total factor productivity. Using firm-level data from Compustat, I document that contractionary monetary policy generates a persistent reduction in firms’ R&D expenditure. The response is asymmetric, with significantly stronger effects following interest rate hikes and during periods of elevated economic uncertainty. The mechanism operates through financial constraints: higher uncertainty lowers firms’ leverage and tightens borrowing conditions, rendering R&D investment particularly sensitive to monetary policy shocks. I develop a DSGE model with endogenous growth and financial frictions, which highlights the credit channel as a key mechanism amplifying the impact of monetary policy on innovative investment.

We study the macroeconomic effects of persistent public investment shocks using a local-projection instrumental-variables framework and European data. For identification, we exploit European Investment Bank loans for public infrastructure projects and address potential endogeneity in loan approval with an inverse-probability-weighted regression- adjustment estimator. Public investment shocks raise employment and output in the medium term, without crowding out private investment and consumption, or generating inflation and additional debt burden. The cumulative output multiplier reaches 3.38 after five years and is significant and larger when credit conditions are favorable. We report significant positive spillover effects from spending in public infrastructure in both output and employment.

Government spending effectiveness depends critically on how it is financed. Using state-dependent SVAR models and local projections on post-war US data, we show that fiscal expansions financed with short-term debt generate significantly larger output multipliers than those financed with long-term debt. This difference mainly stems from private consumption responses: short-term financing crowds in consumption while long-term financing does not. To rationalize this finding, we construct an incomplete markets model in which households invest in short-term and long-term assets. Short assets provide liquidity/safety services; households can (more readily) use them to cover sudden idiosyncratic spending needs. An increase in the supply of these assets, through a short-term debt-financed government expenditure shock, boosts private consumption. We first show this mechanism analytically in a simplified model, and then quantify it in a carefully calibrated New Keynesian model. We find that fiscal multipliers differ substantially across financing modes, with short-term-financed shocks typically exceeding unity while long-term-financed shocks typically fall below unity. We show these differences persist across monetary and fiscal policy regimes, with important implications for optimal debt management and stimulus design.

We present a methodology for generating uncertainty indicators for user-defined topics based on newspaper data. The approach is based on Retrieval-Augmented Generation (RAG) systems commonly used in artificial intelligence applications, which we adapt to construct topic-specific uncertainty measures—referred to as Retrieval- Augmented Uncertainty Indicators (RAUI). The method employs semantic search with an embedding model to select news articles relevant to a given topic, and a large language model (LLM) to quantify the level of uncertainty contained in those articles. We construct uncertainty indicators for multiple topics using Spanish newspaper data and an aggregate measure that also highlights how each topic contributes to overall uncertainty. We present two practical applications of these indicators: a VAR analysis that shows how different sources of uncertainty have different effects on the Spanish economy, and an estimation that generates time-varying fan charts around the Banco de España GDP growth projections.