We study a fiscal policy model in which the government is present-biased towards public spending. Society chooses a fiscal rule to trade off the benefit of committing the government to not overspend against the benefit of granting it flexibility to react to privately observed shocks to the value...

We study a fiscal policy model in which the government is present-biased towards public spending. Society chooses a fiscal rule to trade off the benefit of committing the government to not overspend against the benefit of granting it flexibility to react to privately observed shocks to the value...

I estimate fiscal reaction functions to analyze the cyclical behavior of discretionary measures in the euro area and the potential impact of changes in the fiscal framework. The core is to analyze whether fiscal rules have an asymmetric impact on discretionary measures over the cycle. First,...

In this paper, we analyze the impact fiscal policy rules have on budget deficits and forecasting biases in official budget outlooks. Persistent budget deficits and over-optimistic budget forecasts have been observed in many countries in the past, especially in the euro area. To prevent such...

President Biden signed a $1.9 trillion COVID relief package (the “American Rescue Plan”) on March 11, 2021. Without a corresponding increase in taxes, this plan has set off alarm bells for those concerned about the expansion of government deficits and debt. Mainstream economists have raised...

This essay memorializes Giuseppe Eusepi contribution to political economy by refining the theme he and I set forth in 2017 in Public Debt: An Illusion of Democratic Political Economy. There, we claimed that it was illusory to describe democratic governments as being indebted. We did not advance...

In the paper we provide some empirical evidence of the development of private debt to GDP ratio in the sample of 18 EU Member States. We use detailed national accounts published regularly by the OECD-financial assets and liabilities by institutional sectors (flow of funds). The ratio of private...

Die Modern Monetary Theory (MMT) ist eine empirische Geldtheorie und nutzt insbesondere Bilanzen und Buchungen als methodische Grundlage zur Erkenntnisgewinnung. Nach der funktionalen Ausgestaltung moderner Geldsysteme, in denen die Regierung keine Schulden in Auslandswährung hat oder einen...

The aim of this paper is to assess the consequences of banking crises for public debt. Using an unbalanced panel of 154 countries from 1980 to 2006, the paper shows that banking crises are associated with a significant and long-lasting increase in government debt. The effect is a function of the...

This paper develops a dynamic stochastic general equilibrium model to examine the quantitative macroeconomic implications of countercyclical fiscal policy for France, Germany and the UK. The model incorporates real wage rigidity which is the particular market failure justifying policy...