This 2003 Institute for Fiscal Studies Lecture addresses two sets of issues relevant to current and prospective future E(M)U members: the consequences of the Stability and Growth Pact for fiscal-financial sustainability and macroeconomic stability, and some risks associated with operational...

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 deals with the principles that should govern the design of budgetary and financial policy. The analytical divorce between stabilisation policy, which concerns deviations from full employment (or full information) equilibrium and allocative policy which concerns the full employment (or...

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...

It is not common for an entire scholarly literature to be based on a fallacy, that is, "on faulty reasoning; misleading or unsound argument". The 'fiscal theory of the price level', recently re-developed by Woodford, Cochrane, Sims and others, is an example of a fatally flawed research...

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 discusses how the EU accession countries should pursue full membership in the EMU: adopt the euro. The key messages are the following: 1) Even the largest of the accession countries is too small, too open and too vulnerable to speculative attacks to be a viable optimal currency area....

After an absence of almost half a century, the spectre of deflation is once again haunting the corridors of central banks and finance ministries in the industrial world. While preventing or combating deflation poses some unique difficulties not present in preventing or combating inflation,...

The paper considers the pros and cons for Canada of monetary union between Canada and the U.S. The current Canadian monetary arrangements, a flexible exchange rate and an inflation target, are contrasted both with a unilateral adoption by Canada of the U.S. dollar and with a full, formally...

This paper analyses Krugman's contention that there is a `gold standard paradox' in the speculative attack literature. The paradox occurs if a country's currency appreciates after it runs out of gold or equivalently if a speculative attack can happen only after the country `naturally' runs out...