This paper investigates the interaction between labor market dynamics and sovereign debt risk. Countercyclical default risk and the limited ability to borrow during recessions renders the government a procyclical fiscal policy. The anticipation of higher tax rates in downturns discourages...

This paper studies the interaction between fiscal commitment and sovereign default risk in a model with optimal taxation and government spending. A time-inconsistency problem arises in our framework as the government cannot credibly commit to its future tax policies. As a result, it chooses...

The paper presents and estimates an endogenous growth model with public capital. In contrast, however, to recent studies on economic growth and policy, we allow for capital market borrowing by the government. Since the behavior by the government (tax rates, spending and borrowing) does not...

One of the most progressive and innovative approaches to public investment financing is known as value capture. Value-capture envisions creation of the policy tools to adequately capture the privately accruing changes in the value of sites and/or consumption that arise from public infrastructure...

Financing productive public capital through distortionary taxes typically creates a trade-off: the optimal investment is determined as a compromise between efficiency-enhancing public investment and perturbing market efficiency, but is never socially optimal. In contrast, such a trade-off can...

This paper deals with impacts of fossil fuel subsidy reform on economic growth, focusing mostly on the countries of the Middle East and East Africa (MENA) region. We first develop a theoretical growth model, and use it to demonstrate that a country can achieve higher levels of economic growth if...