In a situation where agents can only observe a noisy signal of the shock to future economic fundamentals, SVAR models can still be successfully employed to estimate the shock and the associated impulse response functions. Identification is reached by means of dynamic rotations of the reduced...

This paper explores the implications of the political economy model of Battaglini and Coate (2008) [8] for the behavior of fiscal policy over the business cycle. The model predicts that fiscal policy is counter-cyclical with debt increasing in recessions and decreasing in booms. Public spending...

In this paper we analyze how the availability of credit in uences the relationship between government size as a proxy for scal stabilization policy and the amplitude of business cycle uctuations in a sample of advanced OECD countries. Interpreting relatively low loan-tovalue ratios as an...

This paper studies optimal taxation in a version of the neoclassical growth model in which investment becomes productive within the period, thereby making the supply of capital elastic in the short run. Because taxing capital is distortionary in the short run, the government׳s ability/desire to...

This paper analyzes the median voter's most preferred sequences of labor taxes in the standard neoclassical growth model. We consider an infinite horizon economy in which agents are heterogeneous with respect to both initial wealth and labor skills. We start by providing a set of sufficient...

In the past, industrial countries have tended to pursue countercyclical or, at worst, acyclical fiscal policy. In sharp contrast, emerging and developing countries have followed procyclical fiscal policy, thus exacerbating the underlying business cycle. We show that, over the last decade, about...

In this paper we investigate the economic dynamics of a seven-equation model of the business cycle. The main distinctive features of the model are related to: (a) the role played by the public sector in redeploying income between workers and capitalists, since it is assumed that the bargaining...

In the second half of the 20th century, Spain provides a case of political regime change, which according to some political economy models should also lead to a shift in the cyclical nature of fiscal policy. We find that in most of the pre-democratic era, there was a strong procyclical bias to...

In this paper we analyze how the availability of credit influences the relationship between government size as a proxy for fiscal stabilization policy and the amplitude of business cycle fluctuations in a sample of advanced OECD countries. Interpreting relatively low loan-tovalue ratios as an...

As oil and gas are exhaustible resources, the need for economic diversification has gained momentum in the Gulf Cooperation Council (GCC) countries immediately after the end of the first oil boom in 1973-74. Economic diversification, in the context of GCC countries, implies development of the...