This paper shows that when earnings are uncertain the substitution of deficit finance for tax finance or the introduction of an unfunded social security program will raise consumption even if all bequests reflect intergenerational altruism. Thus, contrary to the theory developed by Barro and a...

This paper is concerned with delineating conditions under which public financial policies have no real and/or price effects. In the absence of intergenerational distribution effects, public financial policy is irrelevant:an increase in government debt (whether indexed or not), an exchange of...

This paper illustrates the importance of the fiscal framework for monetary analysis by discussing three separate issues. I begin by examining how the fiscal framework changes the macroeconomic equilibrium associated with different steady state rates of money growth. This includes a summary of...

Three ways of averting "excess saving" have been emphasized in both theory and practice. The thrust of the Keynesian prescription was to increase the government deficit to provide demand for the resources that would not otherwise be used for either consumption or investment. In this way,...

This paper makes two contributions. First, we examine the macroeconomic implications of Puerto Rico's Fiscal Plan that was certified in March 2017 for fiscal years 2017-18 to 2026-27. Second, we perform a Debt Sustainability Analysis (DSA) that incorporates the expected macroeconomic dynamics...

Although there is now widespread agreement in the economics profession that discretionary counter-cyclical'fiscal policy has not contributed to economic stability and may have actually been destabilizing at particular times in the past, there is one important condition when discretionary fiscal...

This paper uses the recent controversy between the European Union and the Irish Republic to discuss the more general relation between the European Union, the EMU and the member countries. Despite outstanding economic growth and budget surpluses, Ireland has been criticized by the European...

This lecture examines the effects of tax policy and social security retirement benefits on capital accumulation and economic welfare. The paper begins by examining how capital income taxes reduce the real return to savers and then discusses the welfare loss of capital income taxation relative to...

At a minimum, this paper should serve as a warning against too easy an acceptance of the view that the costs of sustained inflation are small relative to the costs of unemployment. If a temporary reduction in unemployment causes a permanent increase in inflation, the present value of the...

This paper provides a critique of the DSGE models that have come to dominate macroeconomics during the past quarter-century. It argues that at the heart of the failure were the wrong microfoundations, which failed to incorporate key aspects of economic behavior, e.g. incorporating insights from...