We provide an introduction to optimal fiscal and monetary policy using the primal approach to optimal taxation. We use this approach to address how fiscal and monetary policy should be set over the long run and over the business cycle. We find four substantive lessons for policymaking: Capital...

Forward-looking measures like the well-known effective marginal tax rate developed by King and Fullerton (1984) rely strongly on standardized assumptions on the effective use of depreciation deductions. This paper derives a method of assessing these assumptions empirically and of quantifying the...

In this working paper, we decompose fiscal policy in three components: i) responsiveness, ii) persistence and iii) discretion. Using a sample of 132 countries, our results point out that fiscal policy tends to be more persistent than responding to output variations. We also found that while the...

In this working paper, we decompose fiscal policy in three components: i) responsiveness, ii) persistence and iii) discretion. Using a sample of 132 countries, our results point out that fiscal policy tends to be more persistent than responding to output variations. We also found that while the...

This paper assesses the determinants of the length of fiscal consolidation using annual data for 17 industrial countries over the period 1978–2009. Relying on a narrative approach to identify fiscal consolidation episodes, we show that fiscal variables (such as the budget deficit and the level...