Continuous federal budget deficits and a rising public debt have been presented in terms that have produced mounting dissatisfaction with government. One solution offered to deal with this discontent has been a constitutional amendment to balance the federal budget. In a working paper, Charles...

In recent years debt in Colorado has increased at an unsustainable rate. A debt brake is simulated for the Colorado economy. When the debt brake is triggered the spending cap imposed by the Tabor Amendment is reduced, with surplus revenue earmarked for debt reduction. The simulation analysis...

We assess public finances solvency for Euro Area countries using quarterly data between 1999Q1 and 2020Q4. Through a country-by-country analysis, the answer to the title question is true. For most countries, (i) the primary budget balance reacts positively to the lagged public debt ratio and...

In response to the recent sovereign debt crisis, the member states of the European Union agreed to enact balanced budget rules in their national legislation. However, little is known about the public's opinion of balanced budget rules. To fill this gap, we conducted a survey among 2,000...

We study whether and how much the interest bill conditions the size and composition of public expenditures. The group of EU 15 countries over the 1995-2016 period is the object of analysis. We study both total public expenditures and public expenditures by function of government in order to...

We provide a systematic analysis of fiscal consolidation in a dynamic general equilibrium model with a detailed government sector and a share of credit-constrained households. We simulate permanent cuts in government consumption, government investment, and transfer payments as well as permanent...

In a dynamic model of fiscal policy, social polarization provokes a deficit bias. Policy advisors have recently proposed that governments running a deficit should be forced to generate additional tax revenue. We show that this deficit taxation reduces the deficit bias as it internalizes the...

The aim of the research is to illustrate how the degree of effectiveness of fiscal policy measures varies depending on the level of public debt within a group of Central and Eastern European (CEE) states. To this end, a T-SVAR (Threshold Structural Vector Autoregressive) model was implemented,...

How should public debt be managed when uncertainty about the business cycle is widespread and debt levels are high, as in the aftermath of the last financial crisis? This paper analyzes optimal fiscal policy with ambiguity aversion and endogenous government spending. We show that, without...

One of the main functions of public debt is to smooth taxes and spending over time. In the Covid crisis, the Maastricht deficit restrictions were temporarily suspended to allow for large temporary deficits. As recovery sets in, countries are confronted with the task of consolidating the Covid...