This paper explores the political economy of fiscal adjustment. It begins with an examination of the evidence for, and sources of, ‘deficit bias', including political and governance factors, public attitudes, the role of financial markets and imprecision about which debt targets should be...

This paper explores the political economy of fiscal adjustment. It begins with an examination of the evidence for, and sources of, ‘deficit bias’, including political and governance factors, public attitudes, the role of financial markets and imprecision about which debt targets should be...

In the most recent decade, the European Union has shown itself to be less robust than globalists imagined. Globalists believed that supranationality was weatherproof – that it would always outperform national alternatives and would survive adversity. Economic stagnation and Brexit belied these...

We provide a systematic analysis of fiscal consolidation in a medium-scale dynamic general equilibrium model. Our results show that the choice of the consolidation instrument is very important, not only with respect to the short- and long-run output effects of the different consolidation...

This paper is linked to two debates on fiscal policies: first, the implications of low interest-growth differentials for debt sustainability and, second, the reform of the EU fiscal governance framework. In both debates the choice of government debt anchor and the speed of adjustment take centre...

In a dynamic model of fiscal policy, social polarization provokes a deficit bias. Policy advisors have recently proposed that governments running a deficit should be forced to generate additional tax revenue. We show that this deficit taxation reduces the deficit bias as it internalizes the...

Aufgrund der seit langem geführten Debatte um das Für und Wider der Nutzung des Politikinstruments der Staatsverschuldung wissen wir recht viel darüber, was Experten (z. B. Finanzpolitiker/‌-‍wissenschaftler) von Haushaltskonsolidierung, Deficit-Spending oder Verschuldungsgrenzen halten....

This paper is linked to two debates on fiscal policies: first, the implications of low interest-growth differentials for debt sustainability and, second, the reform of the EU fiscal governance framework. In both debates the choice of government debt anchor and the speed of adjustment take centre...

This paper seeks to understand the interplay between banks, bank regulation, sovereign default risk and central bank guarantees in a monetary union. I assume that banks can use sovereign bonds for repurchase agreements with a common central bank, and that their sovereign partially backs up any...

In the paper we show that, most of the time, smooth reduction in the debt ratio is optimal for tax-smoothing purposes when fiscal risks are asymmetric, with large debt-augmenting shocks more likely than commensurate debt reducing shocks. Asymmetric risks are a feature of 200 years of data for...