We use a dynamic game model of a two-country monetary union to study the impacts of an exogenous fall in aggregate demand, the resulting increase in public debt, and the consequences of a sovereign debt haircut for a member country or bloc of the union. In this union, the governments of...

Sustainablity of Austrian public debt is investigated in the context of political objectives such as stabilizing the business cycle, increasing chances for being re-elected and implementing the ideologies of political parties. Several tests indicate that Austrian fiscal policies were sustainable...

This paper presents an optimal fiscal policy response to address the basic trade-off between the automatic stabilisation properties of budgets and the long run fiscal positions. The framework is an overlapping generations model a la Weil (1989), extended to account for stochastic endowments and...