We build a new Keynesian DSGE model consisting of two heterogeneous countries participating in a monetary union. We study how public debt consolidation in a country with high debt (like Italy) affects welfare in a country with solid public finances (like Germany). Our results show that debt...

The paper compares fiscal cyclicality across regions and countries from 1960 to 2016. It finds that more than half of 170 countries analyzed in seven regions had, in more recent years, limited fiscal space, and that their fiscal policy was either cyclical or procyclical. This was particularly...

This paper analyzes the issues of public finance sustainability and suitability of strategies aimed at fiscal consolidation. Contrasting growth-based versus thrift-based consolidation strategies, it is argued that in the light of theory only the former promises success in large economies....