Under limited asset market participation fiscal consolidations have a deep and prolonged deflationary effect, causing substantial short term welfare losses to households whose access to financial markets is limited. We show that it is possible to both reduce public debt and boost consumption of...

This paper provides a comprehensive econometric analysis of some debated issues concerning the political and institutional determinants of fiscal policy outcomes. Several innovative results are obtained. It turns out that a significant effect on fiscal policy formation can be traced back to the...

We consider a standard growth model augmented with a share of rule of thumb con- sumers. A Government ?nances a preset level of public expenditure through ?at tax rates on labor and capital income and also makes lump sum transfers to non ricardian consumers. It has been shown in representative...