Standard growth models predict that consumption and GNP growth rates should not differ among countries when international capital markets are considered. This paper introduces a generational structure which implies that the return on human capital exceeds the return on physical capital in...

This paper deals with fiscal policy over the business cycle when international financial markets are imperfect. I document evidence that government expenditure tends to be more procyclical the higher is the borrowing cost for a sovereign. Decomposing government expenditure components shows that...