Recent work on optimal monetary and fiscal policy in New Keynesian models suggests that it is optimal to allow steady-state debt to follow a random walk. Leith and Wren-Lewis (2012) consider the nature of the timeinconsistency involved in such a policy and its implication for discretionary...

This paper studies the quantitative implications of changes in the composition of taxes for long-run growth and expected lifetime utility in the UK economy over 1970-2005. Our setup is a dynamic stochastic general equilibrium model incorporating a detailed fiscal policy structure, and whose...

Recent attempts to incorporate optimal fiscal policy into New Keynesian models subject to nominal inertia, have tended to assume that policy makers are benevolent and have access to a commitment technology. A separate literature, on the New Political Economy, has focused on real economies where...

We incorporate an uncoordinated redistributive struggle for extra fiscal privileges into an otherwise standard dynamic stochastic general equilibrium model. The main aim is to get model-consistent quantitative evidence of the extent of rent seeking. Our work is motivated by the common belief...

We construct a general equilibrium model of economic growth and optimally chosen fiscal policy, in which individuals compete with each other for a share of government spending and two political parties can alternate in power according to an exogenous reelection probability. The main prediction...