We generalize the result of Alesina and Rodrik (1994) by showing that their static solution is also a time consistent Stackelberg solution of a differential game between the government and the median voter

Solvency is an intertemporal concept, relating to the present value of revenues and expenditures, and encompassing both assets and liabilities. But the standard practice among policy makers, financial market participants and international financial institutions is to assess the strength of the...