Unlike the narrative in Walrasian economic theory, the real world is not one of perfect foresight. This paper replaces this axiom with fundamental uncertainty, as established in original Keynesian theory. Drawing on contributions from Shackle, Okun, Alchian and Davidson, this paper explores how...

Efforts to maintain balanced budgets, driven in part by formal requirements, lead to substantial pro-cyclicality in states' capital investments, transfers to local governments, and spending in areas like education and transportation. Extensive reliance on relatively volatile revenue sources...

In recent years debt in Colorado has increased at an unsustainable rate. A debt brake is simulated for the Colorado economy. When the debt brake is triggered the spending cap imposed by the Tabor Amendment is reduced, with surplus revenue earmarked for debt reduction. The simulation analysis...

Fiscal consolidation often entails balanced budget requirements (BBRs) for local governments. However, little is known about the effects of BBRs on economic activity, as most quasi-experimental estimates of local fiscal multipliers stem from windfall expansionary shocks. This paper studies the...

The European Union (EU) accepted ten new member states (NMS) in 2004. These countries, mostly former socialist countries, have had to adjust their economic policies to the EU's standards. Perhaps most difficult has proven to be fiscal policy whereby NMS must comply with the Stability and Growth...

This paper develops a method for adjusting structural budget balances for asset price cycles and presents estimates of structural budget balances corrected for house-price and equity-price cycles for OECD countries. The traditional cyclically adjusted budget balance indicator, which is the basis...

This paper reviews lessons in fiscal consolidation for the former Soviet Union that emerge from the experience of Central and Eastern European economies in transition. A central lesson is the need to support the macroeconomic stabilization with a front-loaded fiscal adjustment. Consistent with...

The European Union (EU) accepted ten new member states (NMS) in 2004. These countries, mostly former socialist countries, have had to adjust their economic policies to the EU's standards. Perhaps most difficult has proven to be fiscal policy whereby NMS must comply with the Stability and Growth...

The financial crisis and economic downturn are going to weigh on fiscal positions in OECD countries over the short to medium-term, both through the operation of automatic stabilisers and the enactment of discretionary fiscal stimulus packages. However, the strategic policy options facing OECD...

After a brief introduction dealing with critical opinions of some economists on the European austerity policy, the authors point out that austerity as a means of achieving fiscal consolidation and financial stability is applied when the fiscal domain is weak. After analyzing the effects of the...