This paper studies a simple monetary growth model with debt and deficits to investigate the effects of various polices on output and inflation when the central bank is `tough.' In sharp contrast to the vast literature which implicitly or explicitly assumes fiscal dominance regime, in which the...

It is known that, in the context of a real business cycle model with constant returns to scale and a balanced budget fiscal policy rule, steady state indeterminacy may arise as a result of endogenously determined labor income tax rates. This happens for a range of empirically plausible tax rates...

It is known that, in the context of a real business cycle model with constant returns to scale and a balanced budget fiscal policy rule, steady state indeterminacy may arise as a result of endogenously determined labor income tax rates. This happens for a range of empirically plausible tax rates...

Empirical evidence documents a discernible negative relationship between government size, as measured by income tax rates and the output share of government purchases, and the magnitude of macroeconomic fluctuations in OECD countries since 1960. This implies that both taxes and public spending...

This paper examines empirical issues on asymmetric effects of government spending. Increases in government spending under low real interest rates are not associated with the same increases in future tax liabilities as those under high real interest rates. Consequently, the negative impact from...

This paper reexamines the effect of expansionary fiscal policy on the real GDP in the presense of entrepreneurship - firms' activities to predict and react to changes in consumers' taste. The existence of partial crowding out in this paper generates a trade off between private consumption and...