How will countries handle idiosyncratic national macroeconomic shocks under the European single currency? The ways in which European countries now react to internally asymmetric shocks provide a better forecast than do the regional response pattern of the United States. In this paper we compare...

This paper argues that if policymakers seek to enhance global liquidity, then the international community must provide a higher and better coordinated level of fiscal support than it has in the past. Loans to troubled sovereigns or financial institutions imply a credit risk that ultimately must...

This paper studies optimal fiscal policy in an economy where heterogeneous agents with uncertain lifetimes coexist. We show that some plausible social welfare functions lead to time-inconsistent optimal plans, and we suggest restrictions on social preferences that avoid the problem. The...