We provide a systematic analysis of fiscal consolidation in a dynamic general equilibrium model with a detailed government sector and a share of credit-constrained households. We simulate permanent cuts in government consumption, government investment, and transfer payments as well as permanent...

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...

This paper surveys the empirical research on fiscal institutions of the last three decades. The main results are: (i) Constitutional or statutory fiscal limitations have in most cases proved to be effective in cutting down public expenditure, revenue, and debt. (ii) Budgetary proce-dures matter...