Abstract
This thesis contains four essays, which studies the macroeconomic effects of fiscal and monetary policy quantitatively. The first essay investigates whether Swedish postwar business cycles have been generated by domestic or foreign shocks and finds that they are about equally important. In the second essay, the effects of government budget deficits on interest rates in Sweden are studied in a small open economy framework. The empirical results, which have high power due to very large swings in deficits and interest rates, provide support that larger deficits produce higher interest rates and thus give support against the ricardian view. The third essay seeks to identify optimal social insurance and redistribution levels in Sweden and the U.S. with respect to temporary and permanent idiosyncratic productivity risks. The results indicate that Sweden should reduce the social security level while the U.S. should approximately maintain the current level. In the last essay, the small sample properties of a well-known statistical test for the Lucas critique - the super exogeneity test - is studied in a general equilibrium environment. The results indicate that the super exogeneity test do not have sufficient power in small samples.