We develop a method for identifying and quantifying the fiscal channels that help finance government spending shocks. We define fiscal shocks as surprises in defense spending and show that they are more precisely identified when defense stock data are used in addition to aggregate macroeconomic...

The `Excessive Deficit Procedure' of the Maastricht Treaty on Economic and Monetary Union proposes two fiscal convergence conditions for entry and continued membership in the EMU: 1) a country's overall budget deficit for each fiscal year must be equal to or below 3% of GDP, and 2) a country's...

Dynamic stochastic general equilibrium models that include policy rules for government spending, lump-sum transfers, and distortionary taxation on labor and capital income and on consumption expenditures are fit to U.S. data under a variety of specifications of fiscal policy rules. We obtain...

This paper summarizes state balanced budget requirements, and the available empirical evidence on the effect of these rules on state fiscal policies. Existing state rules differ from many current proposals at the federal level. They are typically restricted to part of the state budget, they...

The contrast between the early nineteenth century Argentinean experience of high inflation and the American experience of low inflation is interpreted in terms of a dynamic monetary model of optimal taxation. It is argued that the two countries' experiences diverged because of the different...

Traditional models of politician behavior predict complete or partial policy convergence, whereby electoral competition compels partisan politicians to choose positions more moderate than their most-preferred policies. Alternatively, if politicians cannot overcome the inability to make binding...

This paper deals with several issues regarding the causes and implications of recent and projected U.S. federal budget deficits. It considers why deficits have remained so large in spite of deficit reduction efforts, evaluates the impact of the recent policies of the Clinton administration, and...

We study the nature of systemic sovereign credit risk using CDS spreads for the U.S. Treasury, individual U.S. states, and major European countries. Using a multifactor affine framework that allows for both systemic and sovereign-specific credit shocks, we find that there is considerable...

The War for Independence left the National Government deeply in debt. The spoils from winning that war also gave it an empire of land. So, post-1783, was the National Government solvent? Was its net asset position, land assets minus debt liabilities, positive or negative? Evidence is gathered to...

Congress first imposed an aggregate debt limit in 1939 when it delegated decisions about designing US debt instruments to the Treasury. Before World War I, Congress designed each bond and specified a maximum amount of each bond that the Treasury could issue. It usually specified purposes for...