We develop a rational expectations framework to study the consequences of alternative means to resolve the "unfunded liabilities'' problem---unsustainable exponential growth in federal Social Security, Medicare, and Medicaid spending with no plan to finance it. Resolution requires specifying a...

We use Bayesian prior and posterior analysis of a monetary DSGE model, extended to include fiscal details and two distinct monetary-fiscal policy regimes, to quantify government spending multipliers in U.S. data. The combination of model specification, observable data, and relatively diffuse...

Aging populations in advanced economies are placing ever-increasing demands on government spending in the form of old-age benefits. Economies that have promised substantially more benefits than they have made provision to finance are heading into a prolonged era of fiscal stress. Unresolved...

We use a rational expectations framework to assess the implications of rising debt in an environment with a "fiscal limit." The fiscal limit is defined as the point where the government no longer has the ability to finance higher debt levels by increasing taxes, so either an adjustment to fiscal...

We develop a stylized EU-type model of a union consisting of rich, capital-abundant and high productivity countries, and poor, capital-scarce and low productivity countries. We address two main issues: the efficiency of tax competition and the effect of factor mobility on the size of the welfare...

News - or foresight - about future economic fundamentals can create rational expectations equilibria with non-fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react. Using tax policies as a leading...

Fiscal foresight -- the phenomenon that legislative and implementation lags ensure that private agents receive clear signals about the tax rates they face in the future -- is intrinsic to the tax policy process. This paper develops an analytical framework to study the econometric implications of...

The aging of the population shakes the confidence in the economic viability of pay-as-you-go social security systems. We demonstrate how in a political-economy framework the shaken cofidence leads to the downsizing of the social security-system, and to the emergence of supplemental individual...