This paper investigates budgetary rules for an economy characterized by inflation and volatile relative prices. We view the budgetary process as a limited contingencies contract between the treasury and the ministers. The budgetary process allows a minister, whose realized real budget falls...

This paper explores how state fiscal institutions and political circumstances affect the dynamics of state taxes and spending during periods of fiscal stress. The analysis focuses on the late 1980s, when sharp economic downturns in several regions, coupled with increased expenditure demands, led...

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...

We refer to the idea that government must 'tighten its belt' as a necessary policy response to higher indebtedness as the household fallacy. We provide a reason to be skeptical of this claim that holds even if the economy always operates at full employment and all markets clear. Our argument...

Since almost eliminating net debt, the Australian Government%u2019s attention has turned to the financing of broader balance sheet liabilities, such as public sector superannuation. Australia will be developing a significant financial asset portfolio in the %u2018Future Fund%u2019 to smooth the...

Many organizations have budgets that expire at the end of the fiscal year and may face incentives to rush to spend resources on low quality projects at year's end. We test these predictions using data on procurement spending by the U.S. federal government. Spending in the last week of the year...

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...

This paper shows that in American states balanced budget rules are effective in enforcing fiscal discipline but they have no costs in terms of increased output variability. More specifically, we show that tighter fiscal rules are associated with larger average surplus and lower cyclical...

This paper explores the links between institutional arrangements and fiscal performance in" Latin America. We consider four measures of fiscal performance, namely expenditures, the size of fiscal deficits and debt, and the response of fiscal policy to business" fluctuations; and two...

The 2007-2010 recession has imposed significant fiscal hardships on state and local governments. The result has been state deficits and the need to increase state taxes, cut spending, and withdraw funds from state rainy day accounts. The primary cause of state budget "gaps" has been the rise in...