This paper shows that the fiscal multiplier for purchases of durable and investment goods is very small - much smaller than the multiplier for nondurable goods. Standard models predict small durables multipliers because private sector purchases of durable goods are highly intertemporally...

In a monetary union, the interaction between several governments and a single central bank is plagued by several sources of deficit bias, including common pool problems. Each government has strong preferences over local spending and taxation but suffers only part of the costs of union-wide...

If people understand that some macroeconomic policies are unsustainable, why would they vote for them in the first place? We develop a political economy theory of the endogenous emergence of fiscal crises, based on the idea that the adjustment mechanism to a crisis favors some social groups,...