Talvi, Ernesto; Vegh, Carlos A. - 2021
Based on a sample of 56 countries, we find that while fiscal policy in the G-7 countries appears to be broadly … this puzzle, we develop an optimal fiscal policy model in which running budget surpluses is costly because they create …) fluctuations in the tax base will find it optimal to run a procyclical fiscal policy. We argue that the differences in fiscal …