The incentives for domestic investment in debtor countries are influenced by the terms of their external obligations and by the system of taxation utilized to provide government revenue for debt payments. It is well known that existing debt contracts could be altered to improve the incentives...

This paper considers the merits of reducing or eliminating some specific tax expenditure measures currently in force in the United States with a view to reducing the federal fiscal deficit. The paper starts from the observation that savings decisions in the United States are distorted and that...

Much of the recent research of the international economic consequences of budget deficit has been conducted under the assumption that taxes are lump sum. It has thus abstracted from important issues that arise in the context of distortionary tax systems. Our analysis deals with the international...

This paper explains why the debt reduction motive for countries that are subject to borrowing constraints and a volatile environment is greater than for those with a more stable environment and relatively better access to the financial markets. In particular, it shows that the possibility of...

If permanent output is uncertain, tax smoothing can be perilous: both debt levels and tax rates are difficult to stabilize and may drift upwards. One practical remedy would be to target the debt. However, our simulations confirm that such a policy would require undesirably volatile fiscal...

Empirical evidence shows that fiscal multipliers depend on the state of the cycle, the nature of fiscal policy and the level of debt. In other words, evidence points to non-linearities in the effects of fiscal policy. This paper provides a framework to examine the role of the level of government...

Is there any systematic explanation of variations in the cost of debt servicing over time and across countries? This paper examines the influence of fiscal variables on borrowing costs in a panel of OECD countries, showing that these variables have a significant role. In particular, an...

This paper explores the hypothesis that the propensity to consume out of income is not constant but varies, perhaps in a nonlinear fashion, with fiscal variables. It examines whether there is any empirical evidence to support the hypothesis that households move from non-Ricardian to Ricardian...

This paper examines the relationship between government debt and long-term interest rates. A dynamic general equilibrium model that incorporates debt nonneutrality is specified and solved, and numerical simulations using the model are undertaken. In addition, empirical evidence using panel data...

To monitor fiscal sustainability, this paper proposes a recursive algorithm derived from the law of motion of the debt-to-GDP ratio, subject to a government reaction function that links convergence to the targeted debt ratio with primary fiscal surpluses. Based on quarterly estimates of this...