The financial labor supply accelerator links hours worked to minimum down payments for durable good purchases. When these constrain a household's debt, a persistent wage increase generates a liquidity shortage. This limits the income effect, so hours worked grow. The mechanism generates a...

This paper analyzes the implications of a cost of deviating upwards from a public debt/output guideline, such as the 0.6 ratio in the Maastricht Treaty, in the context of a fiscal policymaking model. Given a preannounced timetable for enforcement, the dynamic paths of the tax rate and government...

This paper analyzes the implications of a cost of deviating upwards from a public debt/output guideline, such as the 0.6 ratio of the Maastricht Treaty, in the context of a policymaking fiscal model. Given a preannounced timetable for enforcement, the dynamic paths of the tax rate and government...

This paper investigates the drastic reduction in public spending in OECD countries during the 1990s. Using a panel data set of 18 countries, we find this adjustment to be a general OECD development, beginning in 1994, and that participation in the Maastricht Treaty or in the Stability and Growth...