What are the macroeconomic effects of tax adjustments in response to large public debt shocks in highly integrated economies? The answer from standard closed-economy models is deceptive, because they underestimate the elasticity of capital tax revenues and ignore crosscountry spillovers of tax...

Europe's debt crisis casts doubt on the effectiveness of fiscal austerity in highly-integrated economies. Closed-economy models overestimate its effectiveness, because they underestimate tax-base elasticities and ignore cross-country tax externalities. In contrast, we study tax responses to debt...

As of August 2015, Greece's loan repayments due to external creditors through 2057 summed to €319.5 billion, requiring an average debt payment on a flow basis of 4.1 percent of 2014 Greek GDP. This paper examines the economic impact of increases in distortionary taxes on consumption, capital...

We examine austerity in advanced economies since the Great Recession. Austerity shocks are reductions in government purchases that exceed reduced-form forecasts. Austerity shocks are statistically associated with lower real GDP, lower inflation and higher net exports. We estimate a...