This paper introduces a concern for model misspecification in a Lucas-Stokey optimal fiscal policy setting. The representative household in this economy is endowed with the knowledge of a reference model for the government spending process but acknowledges that this model is potentially...

This paper estimates the causal effect of fiscal rules on fiscal balances in a panel of 142 countries over the period 1985-2015. Our instrumental variable strategy exploits the geographical diffusion of fiscal rules across countries. The intuition is that reforms in neighboring countries may...

How much fiscal space do Latin American countries have to increase their tax burdens in the long term? This paper provides an answer through Laffer curves estimates for taxes on labor, capital, and consumption for the six largest emerging economies of the region: Argentina, Brazil, Chile,...

This paper investigates the relationship between the perceived Zimbabwean Fiscal Policy (FP) outcomes and the preferences of the people of Zimbabwe, resident in the city of Harare in the context of the Fiscal Policy Framework (FPF) of Zimbabwe. It looks at how people are aware and confident...

Political economy theory expects that changes in macroeconomic governance are often catalyzed by institutional factors, such as partisanship, elections, or IMF conditionality. I challenge and contextualize this view by incorporating the role of technocratic advisors into a domestic policymaking...

Political economy theory expects politicians to use budget deficits to engineer an election-timed boom, known as the political business cycle. We challenge and contextualize this view by incorporating the financial constraints faced by governments into an electoral framework. We argue that the...

Official estimates of the budgetary effects of proposed federal legislation generally exclude behavioral responses that would have macroeconomic effects. In my view, including such effects — an approach known as “dynamic scoring” — in estimates for certain proposals would improve the...

This paper studies fiscal policy effects in developing countries with external debt and sovereign default risks. State-dependent distributions of fiscal limits are simulated based on macroeconomic uncertainty and fiscal policy specifications. The analysis shows that expected future revenue plays...

Former CBO director Doug Elmendorf recently argued that Congress should account for macroeconomic feedback when scoring major tax and spending policies. In this brief, Donald Marron agrees, arguing that CBO and JCT can implement such dynamic scoring in an objective, nonpartisan manner. Dynamic...

Unlike many theoretical analysis of tax effects on household debts in a monetary union, this paper builds up analysis from a household budget constraint, instead of starting from a model. By a monetary union, it is assumed that all nations in the union share same currency. The size of tax...