This paper incorporates an uncoordinated struggle for extra fiscal favors into an otherwise standard Dynamic Stochastic General Equilibrium model. This reflects the popular belief that interest groups compete for privileged transfers and tax treatment at the expense of the general public...

We welfare rank various tax-spending policies. The setup is a New Keynesian model of a semi-small open economy featuring sovereign risk premia and loss of monetary policy independence. The model is calibrated to match data from the Italian economy 2001-2011. We compute various optimized...

We build a new Keynesian DSGE model consisting of two heterogeneous countries participating in a monetary union. We study how public debt consolidation in a country with high debt (like Italy) affects welfare in a country with solid public finances (like Germany). Our results show that debt...