This short paper reconsiders the popular result that the lower the probability of getting reelected, the stronger the incumbent politicians’ incentive to follow short-sighted, inefficient policies. The set-up is a general equilibrium model of endogenous growth and optimal fiscal policy, in...

This paper incorporates competition for fiscal transfers (or, equivalently, rent seeking from state coffers) into a standard general equilibrium model of economic growth and endogenously chosen fiscal policy. The government generates tax revenues, but then each selfinterested individual agent...

We provide a comprehensive survey of the recent literature on the link between productive government expenditure and economic growth. Starting with the seminal paper of Robert Barro (1990) we show that an understanding of the core results of the ensuing contributions can be gained from the study...

We use a new dataset on non-resource GDP to examine the performance of commodity-exporting countries in terms of macroeconomic stability and economic growth in a panel of up to 129 countries during the period 1970-2007. Our main findings are threefold. First, we find that overall government...

The paper models the interaction between risk taking in the financial sector and central bank policy for the case of pure illiquidity risk. It is shown that, when bad states are highly unlikely, public provision of liquidity may improve the allocation, even though it encourages more risk taking...

The paper models the links between financial fragility, asset markets and monetary policy. It is shown that central banks concern about the cost of financial disruption generates an asymmetric response, thus contributing to the creation of an asset price bubble. In an economy with a highly...

This paper reviews whether and how the ongoing financial crisis has influenced central banking policy practice. Taking a historical perspective, it argues that throughout the existence of central banks the main objective has remained the same¯stability. What has been evolving over time, and has...

The establishment of independent authorities for monetary policy and for competition policy was part of the institutional consensus of the Great Moderation. The paper contrasts how policy has operated in the two spheres, especially as regards the role of law. It then discusses the application of...

This paper reviews the challenges faced by central banks in recent years in order to evaluate their policy implications going forward. To highlight the genuine uncertainty surrounding the lessons to be drawn, the paper examines recent experience through two intentionally polarised perspectives,...

In the economic environment that has been emerging over the last couple of decades, it is more likely that the occasional build-up of financial imbalances, typically in the form of unsustainable credit and asset price booms, will occur against the background of low and stable inflation, posing a...