The global financial crisis and the euro area sovereign debt crisis that followed induced a rapid deterioration in the fiscal positions of countries across the globe. In the ensuing fiscal adjustment process, public investments were severely reduced in many countries. How harmful is this for...

Using a panel fixed effects model for a sample of 121 countries covering 1975-2005, we examine how financial development, financial liberalization and banking crises are related to income inequality. In contrast with most previous work, our results suggest that all finance variables increase...

The Excessive Deficit Procedure (EDP), central to the Stability and Growth Pact, is criticized for both its procyclical effects and – in contrast – a perceived lack of enforcement. To test its actual effects, we construct a real-time database of EDP recommendations and estimate augmented...

We introduce the concept of behavioral learning equilibrium (BLE) into a high dimensional linear framework and apply it to the standard New Keynesian model. For each endogenous variable, boundedly rational agents use a simple, but optimal AR(1) forecasting rule with parameters consistent with...

We estimate the effect of consolidation efforts on investors' perception of government's solvency. To this end, we analyze announcements by Dutch government officials between September 2008 and December 2014 and select those messages that contain relevant new information on the likelihood and...

Earlier studies on the equilibrium properties of standard dynamic macroeconomic models have shown that an inflation-targeting central bank imposes strict budgetary requirements on fiscal policy needed to obtain a unique and stable equilibrium. The failure of only one fiscal authority within a...

Enforcement of European fiscal rules, to a large extent, hinges on the fiscal forecasts prepared by the European Commission (EC). The reliability of these forecasts has received little attention in the literature, despite the fact that i) the forecasts have potentially far-reaching consequences...

We examine whether fiscal rules constrain incumbent governments to use fiscal policy for re-election purposes. Using data on fiscal rules provided by the IMF for a sample of 77 (advanced and developing) countries over the 1984-2015 period, we find that after the Global Financial Crisis political...

This paper examines the distributional implications of monetary pol-icy from a long-run perspective with data spanning a century of modern economic history in 12 advanced economies between 1920 and 2015. We employ two complementary empirical methodologies for estimating the dynamic responses of...

We estimate the effects of government consumption and investment shocks during prolonged episodes of low interest rates, which we consider as proxy for the effective lower bound. Using a panel VAR model for 17 advanced countries, in which we include real government spending, output, inflation,...