Fiscal policy shocks impact economy differently based on government debt levels.
The study looks at how government debt affects the impact of government spending changes on the economy. By using a specific economic model, the researchers found that the effect of government spending changes can vary depending on how much debt the government has. In the long term, the impact is similar to previous studies, but in the short term, it can be quite different. This is because of how inflation and debt levels interact in the real world, which is not usually considered in standard economic models.