Any fiscal path is sustainable if future fiscal policy responds sufficiently to high deficits. Previous work found that Congress reduced the deficit during 1984-2003 when projected deficits rose. We find that this year-to-year feedback has disappeared: Congress on average during 2004-2024 did...

In this paper we discuss fiscal and monetary policy issues facing heavily-indebted poor countries (HIPCs) who receive debt reduction via the enhanced HIPC initiative. This debt relief program is distinguished from previous ones by its conditionality: freed resources must be used for poverty...

This paper makes two contributions. First, we examine the macroeconomic implications of Puerto Rico's Fiscal Plan that was certified in March 2017 for fiscal years 2017-18 to 2026-27. Second, we perform a Debt Sustainability Analysis (DSA) that incorporates the expected macroeconomic dynamics...

The global financial crisis has permanently lowered the path of GDP in all advanced economies. At the same time, and in response to rising government debt levels, many of these countries have been engaging in fiscal consolidations that have had a negative impact on growth rates. We empirically...

We study optimal fiscal and redistributive policies in an open economy without commitment. Due to its redistributive motives, the government's incentive to default on its external debt is affected by inequality. We show that in equilibrium the economy endogenously fluctuates between two regimes....

This paper measures the 2007-13 evolution of employment tax rates in the U.K. and the U.S., especially as they are influenced by changes in tax and safety net benefit rules. The magnitudes of the U.S. changes are greater, in the direction of taxing a greater fraction of the value created by...

This paper studies the optimal design of fiscal limits in the context of a simple political economy model. The model features a single politician and a representative voter. The politician is responsible for choosing the level of public spending for the voter but may be biased in favor of...

After the Global Financial Crisis a controversial rush to fiscal austerity followed in many countries. Yet research on the effects of austerity on macroeconomic aggregates was and still is unsettled, mired by the difficulty of identifying multipliers from observational data. This paper...

This paper offers three results. First, in line with the previous literature, we confirm that fiscal adjustments based mostly on the spending side are less likely to be reversed. Second, spending based fiscal adjustments have caused smaller recessions than tax based fiscal adjustments. Finally,...

Why do countries find it so hard to get their budget deficits under control? Systematic patterns in the errors that official budget agencies make in their forecasts may play an important role. Although many observers have suggested that fiscal discipline can be restored via fiscal rules such as...