This paper explores the relationship between the demographic characteristics of a community and the quantities of goods and services provided by its government We consider three models of public spending: a traditional "selfish" public choice model in which individuals care only about...

Do state and local governments smooth their consumption spending across years, or is their spending driven mainly by contemporaneous changes in resources? We design a test to determine which view of state and local spending is more consistent with the data. We find that state and local spending...

Despite widespread concern and discussion, no consensus exists concerning the causes of the "infrastructure crisis." We investigate several models of the determination of local public capital expenditures. Using Euler equation methods, we find that the hypothesis that construction spending is...

In the United States, local government expenditures are heavily subsidized through a variety of sources. This paper explores theoretically and then simulates empirically the effects of eliminating either of two federal subsidies encouraging local government expenditures: (1) income tax...

We introduce a solution technique for the study of discrete time stochastic models populated by long-lived agents. We introduce aggregate uncertainty and complete markets into a 'perpetual-youth' model of a kind first studied by Olivier Blanchard and we show that the pure-trade version of the...

We discuss the main fiscal policy issues in the Eurozone. Our goal is pedagogical: we do not make any new proposal, but try to represent fairly the various sides of the debate. We focus on two issues that are at the core of the current debate. The first is that, right from the start, the...

From a macroeconomic perspective, the short-term interest rate is a policy instrument under the direct control of the central bank. From a finance perspective, long rates are risk-adjusted averages of expected future short rates. Thus, as illustrated by much recent research, a joint...

We construct and estimate a dynamic stochastic general equilibrium model that features demand- and supply-side uncertainty. Using term structure and macroeconomic data, we find sizable effects of uncertainty on risk premia and business cycle fluctuations. Both demand-side and supply-side...

The paper discusses policy relevant models, going from (1) chronic inflation in the 20th century after WWII, to (2) credit sudden stop episodes that got exacerbated in Developed Market economies after the 2008 Lehman crisis, and appear to be associated with chronic deflation. The discussion...