Exploring the period since the inception of the euro, we show that secondary-market yields on Italian public debt increase in anticipation of auctions of new issues and decrease after the auction, while no or a smaller such effect is present for German public debt. However, these yield movements...

This paper derives and estimates rules for fiscal policy that prescribe the optimal response to changes in unemployment and debt. We combine the reducedform model of the economy from a linear VAR with a non-linear welfare function and obtain analytic solutions for optimal policy. The variables...

Sweden was hit by a severe macroeconomic crisis in the early 1990s. GDP fell for three consecutive years in 1991-1993, unemployment increased by 9 percentage points, banks had to be nationalized, and public budget deficits exceeded 10 percent of GDP. The recovery was however quick. GDP growth...

We use the time series of shifts in U.S. Federal tax liabilities constructed by Romer and Romer to estimate tax multipliers. Differently from the single-equation approach adopted by Romer and Romer, our estimation strategy (a Var that includes output, government spending and revenues, inflation...

This paper shows how the richer frequency and variety of fiscal policy shocks available in an international sample can be analyzed recognizing the heterogeneity that exists across different countries. The main conclusion of our empirical analysis is that the question 'what is the fiscal policy...

We examine debt-sensitive majority rules. According to such a rule, the higher a planned public debt, the higher the parliamentary majority required to approve it. In a two-period model we compare debt-sensitive majority rules with the simple majority rule when individuals differ regarding their...

The currently available empirical evidence shows remarkable differences between various estimates of the effects on U.S. output of an exogenous shift in Federal tax liabilities. Shocks identified via the narrative method imply a multiplier of about three over an horizon of three years. Tax...

The fiscal theory of the price level asserts that the price level is determined by the ratio of outstanding public nominal debt into the present value of real primary budget surpluses of the government. We here argue that the logic of the fiscal theory fails when at least part of the public debt...

In terms of the ratio of its public debt and public deficit to GDP the United States lies in the middle of the pack of industrial countries. The period since 1980 is the only peacetime period outside the Great Depression to see a sustained increase in the debt-GDP ratio. The budgetary...

In this paper we evaluate internationally agreed limits on public sector debt and deficits, such as those agreed by the EC countries in the Treaty of Maastricht as preconditions for membership in a monetary union. These fiscal convergence criteria require that general government budget deficits...