In a competitive two-country overlapping generations model with perfect capital mobility, a plan that is individually Pareto optimal (that is Pareto optimal with respect to individual preferences) can be sustained without coordination of national fiscal policies where the fiscal arsenal is...

The paper first reviews the budget identities of the fiscal and monetary authorities and the solvency constraint or present value budget constraint of the consolidated public sector, for both closed and open economies. It then discusses the new conventional wisdom concerning the fiscal roots of...

In a dynamic optimizing model with costly tax collection, a tax cut by one nation creates positive externalities for the rest of the world if initial public debt stocks are positive. By reducing tax collection costs, current tax cuts boost the resources available for current private consumption,...

The paper develops a forward-looking comprehensive accounting framework for the public sector. By integrating the public sector budget constraint forward in time the government's present value budget constraint (PVBC) is obtained. In addition to the familiar financial assets and liabilities,...

The paper provides an account of the current global economic situation, outlook and policy options. Medium-term prospects are mediocre and fraught with considerable downside risk. Fiscal and monetary policy options for the main industrial countries to improve global economic performance are...

The paper studies the effects of alternative financing policies in the open economy. There is a non-trivial role for financing policy because of the failure of first-order debt neutrality due to uncertain private lifetimes. Both the single-country case and the interdependent two-country case are...

We study the effects of government spending by using a structural, large dimensional, dynamic factor model. We find that the government spending shock is non-fundamental for the variables commonly used in the structural VAR literature, so that its impulse response functions cannot be...

We use a dynamic factor model to provide a semi-structural representation for 101 quarterly US macroeconomic series. We find that (i) the US economy is well described by a number of structural shocks between two and six. Focusing on the four-shock specification, we identify, using sign...

In this paper we evaluate internationally agreed limits on public sector debt and deficits, such as those agreed by the EC countries in the Treaty of Maastricht as preconditions for membership in a monetary union. These fiscal convergence criteria require that general government budget deficits...

This paper contains a selective review of some of the key fiscal issues faced by transition economies. The twelve countries that provide the empirical background for this study have all been under Fund programmes for at least some of the time since they initiated their transitions from plan to...