This paper examines the effects of policy coordination in a two-country world with endogenous growth and imperfect capital mobility.Public investment and a public consumption good are financed by a source-based capital-income tax. By comparing the cases in which countries do and do not...

We investigate the effects of fiscal policy surprises for US data, using vector autoregressions.We overcome the difficulties that changes in fiscal policy may manifest themselves in variables other than fiscal variables first and that fiscal variables may respond 'automatically' to business...

In many developing and developed countries, government debt stabilization is an important policy issue. This paper models the strategic interaction between the monetary authorities who control monetization and the fiscal authorities who control primary fiscal deficits. Government debt dynamics...

The replacement of national currencies by a common currency in the EMU causes a monetary externality if the European Central Bank is inclined to monetize part of outstanding government debt in the community.High government debt in one part of the EU then increases the common inflation rate.We...

We study the evolution of the response of scal policy to monetary policy shocks in the EMU in the light of two important events: the signing of the Maastricht treaty in 1992 and the introduction of the EMU in 1999. Based on impulse responses from a panel VAR, we nd that scal and monetary policy...

One of the main contributions of modern money theory (MMT) has been to explain why monetarily sovereign governments have a very flexible policy space. Not only can they issue their own currency, but also any self-imposed constraint on budgetary operations can be easily bypassed. Through a...

The present article offers a fundamental critique of fiscal policy as it is understood in theory and exercised in practice. Two specific demand-side stabilization methods are examined here: conventional pump priming and the new designation of fiscal policy effectiveness found in the new...

Did the 2008 rebate fail to stimulate consumer spending? In their influential <i>American Economic Review</i> articles, John Taylor and Martin Feldstein each claim that Bureau of Economic Analysis (BEA) aggregate time series data show that the 2008 rebate failed. Reexamining the BEA data, we find that...

In this paper, we use the structural VAR model to analyse the dynamic effects of (discretionary) fiscal shocks on the economic activity of the private sector in Croatia between 2000 and 2012. Due to the fact that Croatia is a small open transition economy, we assume that shocks of foreign origin...

Our aim is to provide insights into some basic facts of US government debt management by introducing simple financial frictions in a Ramsey model of fiscal policy. We find that the share of short bonds in total U.S. debt is large, persistent, and highly correlated with total debt. A well known...