We develop a simple two-period principal-agent model in which a present-biased government, the agent, chooses public investment levels given a deficit rule imposed by the principal. The principal sets a deficit cap to curb current debt-financed consumption. In doing so, it also reduces long-term...

This paper presents a comprehensive framework examining fiscal sustainabil- ity in developing economies. It integrates public capital, labor informality, and global liquidity shocks in a two-sector DSGE model for a small open economy, revealing their intricate interplay and nonlinear impact on...

We will study in this paper the relation between public investment, public debt and fiscal rules in the European Union countries. The strict fiscal rules imposed by EU have negatively affected the investments. The decline in public investment in European Union is related to the fiscal rules...

In this paper, we compare growth and welfare effects of various budget rules within an endogenous growth model with productive public capital, utility enhancing public consumption and public debt. We find that introducing a fixed deficit regime does not affect the long run growth rate compared...

In this paper, we compare growth and welfare effects of various budget rules within an endogenous growth model with productive public capital, utility enhancing public consumption and public debt. We find that a fixed deficit regime does not affect the long run growth rate compared to a balanced...

The implications of delegating fiscal decision making power to sub-national governments has become an area of significant interest over the past two decades, in the expectation that these reforms will lead to better and more efficient provision of public goods and services. The move towards...

This paper analyses the link between discretionary fiscal policy and interest-growth differentials (r-g). Panel regressions based on a dataset for 20 advanced countries over the years 1990-2019 reveal no evidence of a systematic linear relationship between fiscal policy and r-g. However, more...