Fiscal policy in the Euro area is still dominated by austerity measures implemented under the institutional setting of the 'reformed' stability and growth pact, and the even stricter 'fiscal compact'. At the same time, calls for a more expansionary fiscal policy to overcome the economic crisis...

Fiscal policy in the Euro area is still dominated by austerity measures implemented under the institutional setting of the 'reformed' stability and growth pact, and the even stricter 'fiscal compact'. At the same time, calls for a more expansionary fiscal policy to overcome the economic crisis...

This paper examines a dynamic stochastic economy with a benevolent government that cannot commit to future policies. Following Phelan and Stacchetti (2001), we consider sequential sustainable equilibria (SSE). We numerically solve for the set of equilibrium payoffs, and investigate whether the...

This paper examines a dynamic stochastic economy with a benevolent government that cannot commit to its future policies. I consider equilibria that are time-consistent and allow for history-dependent strategies. A new numerical algorithm is developed to solve for the set of equilibrium payoffs....

The paper examines the role of fiscal and monetary policy on the dynamics of monetary expansion in a macroeconomy. Its microeconomic structure defined by producers with neoclassical production functions, heterogeneous OLG consumers, and a stationary fiscal and monetary policy induces a...

This paper studies how distributional and electoral concerns shape sovereign default incentives within a quantitative model of sovereign debt with heterogeneous agents and non-linear income taxation. The small open economy is characterized by a two-party system in which the left-wing party has a...

Despite sustained efforts made in recent years to rein in budget deficits, a majority of OECD countries still face substantial public finance consolidation needs. While essential to avoid the disruption and large costs ultimately associated with unsustainable public finances, fiscal...

This paper documents the systematic response of postwar U.S. fiscal policy to fiscal imbalances and the business cycle using a multivariate Fiscal Taylor Rule. Adjustments to taxes and purchases both account for a large portion of the fiscal response to debt, while authorities seem reluctant to...

This paper documents the systematic response of postwar U.S. fiscal policy to fiscal imbalances and the business cycle using a multivariate Fiscal Taylor Rule. Adjustments to taxes and purchases both account for a large portion of the fiscal response to debt, while authorities seem reluctant to...

This paper offers three results. First, in line with the previous literature we confirm that fiscal adjustments based mostly on the spending side are less likely to be reversed. Second, spending based fiscal adjustments have caused smaller recessions than tax-based fiscal adjustments. Finally,...