This paper studies the effects of fiscal policies -- depicted as stochastic changes in government spending and distortionary tax rates -- when the government cannot use lump sum taxes to achieve intertemporal budget balance. This framework contrasts the more standard analysis in which spending...

This paper studies the effects of fiscal policies -- depicted as stochastic changes in government spending and distortionary tax rates -- when the government is constrained from using lump sum taxes for achieving intertemporal budget balance. The ratio of debt to gnp, therefore, has consequences...

Peacetime government spending has risen steadily from less than 10 percent of GNP in the 1920s to about 30 percent of GNP today. The larger role of government has generated increasing interest in the macroeconomic effects of government spending. This paper examines the effects of government...