How should public debt be managed when uncertainty about the business cycle is widespread and debt levels are high, as in the aftermath of the last financial crisis? This paper analyzes optimal fiscal policy with ambiguity aversion and endogenous government spending. We show that, without...

India has a long history of running fiscal deficits. Two broad considerations motivate a government to run a deficit: tax smoothing and tax tilting. This paper tests a version of Barro`s tax-smoothing model, using Indian data for the period 1951-52 to 1996-97. The empirical results indicate that...

We study the fiscal policy reactions of municipalities in the German state of North Rhine-Westphalia to an unanticipated spending shock. The implementation of a horizontal transfer system led to additional contributions for selected municipalities. Using the quasi-random assignment, we examine...