It is widely believed and often argued that budget process transparency has large, positive effects on fiscal performance. However, the evidence linking transparency and fiscal policy outcomes is far from compelling. We modify the "debt as precommitment" model of Alesina and Tabellini (1990) by allowing for budget inertia and reputational costs. These modest changes produce an equilibrium level...

The severe global economic downturn and the large stimulus programs that governments in many countries adopted in response have generated a resurgence in research on the effects of fiscal policy. One key lesson emerging from this research is that there is no single fiscal multiplier that sums up the economic impact of fiscal policy. Rather, the impact varies widely depending on the specific fis...

We consider a general class of endogenous growth models with infinitely lived households and analyze how different budgetary rules affect the stability of the economy. We show that a discretionary fiscal policy implies that the government always violates its inter-temporal budget constraint along a balanced growth path, whereas a balanced budget rule tends to stabilize the economy. A rule based...

This paper aims to provide a non-technical introduction into the SVAR methodology. Particular emphasize is put on the approach to identification in SVAR models, which is compared to identification in simultaneous equation models. It is shown that SVAR models are useful tools to analyze the dynamics of a model by subjecting it to an unexpected shock, whereas simultaneous equation models are bett...

Views expressed are those of the authors and do not necessarily represent official opinions of the World Bank. Abstract This paper uses a new database on foreign aid to examine the relationships among foreign aid, economic policies, and growth of per capita GDP. In panel growth regressions for 56 developing countries and six four-year periods (1970-93) the policies that have a large effect on g...

There has been a resurgence of interest, in many parts of the world, in problems of multi-level government finance. Recent and ongoing political and economic developments raise questions about the role of the nation, subnational governments, and supranational public authorities in the provision and financing of public-sector programs. This paper presents a selective survey of some of these deve...

This paper develops a dynamic stochastic general equilibrium portfolio balance model that accomplishes two objectives. First, it describes a realistic environment in which a central bank can choose an interest rate path independently of the desired path of its nominal anchor. Second, it suggests an explanation for the high average currency risk premia in emerging market interest rates. Our conc...

The fiscal condition of most OECD countries has deteriorated markedly in the last 30 years. But beyond this general weakening, there has been considerable variation in the fiscal performance of these countries. For example, Italy, Belgium, Japan and Ireland accumulated significant amounts of public debt whereas Finland, Norway, the UK and, until recently, Germany, implemented relatively conserv...