We study a fiscal policy model in which the government is present-biased towards public spending. Society chooses a fiscal rule to trade off the benefit of committing the government to not overspend against the benefit of granting it flexibility to react to privately observed shocks to the value...

We study a fiscal policy model in which the government is present-biased towards public spending. Society chooses a fiscal rule to trade off the benefit of committing the government to not overspend against the benefit of granting it flexibility to react to privately observed shocks to the value...

I estimate fiscal reaction functions to analyze the cyclical behavior of discretionary measures in the euro area and the potential impact of changes in the fiscal framework. The core is to analyze whether fiscal rules have an asymmetric impact on discretionary measures over the cycle. First,...

In this paper, we analyze the impact fiscal policy rules have on budget deficits and forecasting biases in official budget outlooks. Persistent budget deficits and over-optimistic budget forecasts have been observed in many countries in the past, especially in the euro area. To prevent such...

President Biden signed a $1.9 trillion COVID relief package (the “American Rescue Plan”) on March 11, 2021. Without a corresponding increase in taxes, this plan has set off alarm bells for those concerned about the expansion of government deficits and debt. Mainstream economists have raised...

This essay memorializes Giuseppe Eusepi contribution to political economy by refining the theme he and I set forth in 2017 in Public Debt: An Illusion of Democratic Political Economy. There, we claimed that it was illusory to describe democratic governments as being indebted. We did not advance...

Sustainablity of Austrian public debt is investigated in the context of political objectives such as stabilizing the business cycle, increasing chances for being re-elected and implementing the ideologies of political parties. Several tests indicate that Austrian fiscal policies were sustainable...

This paper develops a dynamic stochastic general equilibrium model to examine the quantitative macroeconomic implications of countercyclical fiscal policy for France, Germany and the UK. The model incorporates real wage rigidity which is the particular market failure justifying policy...

Since the start of the financial crisis, industrial country public debt levels have increased dramatically. And they are set to continue rising for the foreseeable future. A number of countries face the prospect of large and rising future costs related to the ageing of their populations. In this...

In this paper we investigate the real effects of fiscal policy in Brazil during the 1995-2008 period by estimating a VAR model that explicitly takes into consideration the role of public debt in the determination of fiscal variables, as recommended by Favero and Giavazzi (2007). According to our...