We present new evidence showing that fiscal austerity strengthens support for redistribution, especially for the relatively well-off. Our theoretical model proposes two mechanisms to explain this heterogeneity in support for redistribution: "altruism" and "appreciation". We test our theoretical...

This paper presents a comprehensive framework examining fiscal sustainabil- ity in developing economies. It integrates public capital, labor informality, and global liquidity shocks in a two-sector DSGE model for a small open economy, revealing their intricate interplay and nonlinear impact on...

We develop a Fiscal Frontier which traces out the maximum government debt level that can be sustained at a given welfare cost. Through duality, the intertemporal policy mix underpinning the Frontier mirrors standard Ramsey policy and defines an upper limit on the welfare gains that can be...

This study uses simulations of state-dependent distributions of fiscal limits for 18 economies in Central America and the Caribbean to better understand governments' ability to service their debt, arising from endogenously determined dynamic Laffer curves. Using a small, open economy model to...

We develop a closed economy model to study the interactions among sovereign risk premia, fiscal limits, and fiscal policy. The stochastic fiscal limits, which measure the ability and willingness of the government to service its debt, arise endogenously from a dynamic Laffer curve. The...

We develop a closed economy model in order to study the interactions among sovereign risk premia, fiscal limits and fiscal policy. Default risk premia reflect the market's expectations about the ability and willingness of the government to service its debt. The government's ability arises...

We develop a closed economy model in order to study the interactions among sovereign risk premia, fiscal limits and fiscal policy. The stochastic fiscal limit, which measures the ability and willingness of the government to service its debt, arises endogenously from dynamic Laffer Curves. The...

Using the Reinhart-Rogoff dataset, we find a debt threshold not around 90 percent but around 30 percent above which the median real GDP growth falls abruptly. Our work is the first to formally test for threshold effects in the relationship between public debt and median real GDP growth. The null...

We use a panel of 21 OECD countries from 1970 to 2009 to investigate the effects of different fiscal adjustment strategies on long-term interest rates - a key fiscal indicator reflecting the costs of government debt service. A government confronted with high deficits and rising debt will sooner...

Using a Bayesian Vector Autoregressive Model (BVAR) analysis, this paper explores the link between financial stress, economic activity, and government debt in Turkiye from January 1992 to December 2020. First, using the equally variance weighting approach, we calculate a financial stress index...