Corsetti, Giancarlo; Roubini, Nouriel - In: Economics and Politics 9 (1997) 1, pp. 27-54
In this paper we reconsider the trade-off between rules and discretion in fiscal policy in the presence of politically motivated fiscal deficits. We present a model of political bias in the budget process appropriately developed to allow for tax-smoothing-motivated deficits as well as for the...