Unsustainable levels of debt for some European economies is causing enormous strain in the Euro area. How to tide over the debt crisis seems to be the most important objective the European policy makers are currently facing. We use a dynamic general equilibrium closed economy model to compute...

Using the simple arithmetic of government budget constraint, we perform an analysis on the Italian case, investigating the consequences on the main public finance aggregates of the adoption of a fiscal policy rule responding to past real debt/GDP ratio. Such a rule, firmly grounded in the...

This paper investigates the implications of alternative scale variables of money demand for the comparison of a flexible exchange rate regime with a monetary union in a New Open Economy Macroeconomics setup. The welfare evaluation of exchange rate regimes esstentially depends on the exchange...

The aim of this paper is to point out the shortcomings of propositions that deny economic policy any active role and propose a simple model by which public expenditure is still recognised as performing an active and positive function. The core of our thesis is that public deficit, because it...

The failure of key EU Member States to respect the provisions of the Stability and Growth Pact (SGP) a few years after its inception triggered a heated debate on how to reform the framework of fiscal policy coordination in the Economic and Monetary Union (EMU). This paper analyzes 101 reform...

Since 1991, public finance of the Colombian Central Government reveals an explosive pattern in the burden in terms of GDP of interest payments of public debt, reaching levels over 4%. This behavior is deeply connected with a debt financing public policy based on issuing public debt in the...

The paper attempts to empirically explore the transmission mechanism regarding the short-term impact of public debt and growth. We examine and evaluate the direct effect of higher indebtedness on economic growth for countries in the EU which are in the epicentre of the current sovereign debt...

The present paper treats the issue of economic foundations, on which political power rests, and the specific problem of public debt in the developed countries. Starting from the general question: “Why do rich governments borrow so much?” the paper develops a model of political power based on...

Lack of coordination between the monetary and fiscal authorities will result in inferior overall economic performance. This paper studies the interactions between monetary and fiscal policies and its effect on the economic performance by using al cointegration tests in the case of Euro Area....