Fiscal rules specify quantitative targets for key budgetary aggregates. In this paper, we review the experience with such rules in Japan and in the EU. Comparing the performance of fiscal policy in the 1980s and 1990s until 2003, we find that the fiscal rule of the 1980s exerted some but not much disciplinary influence on Japanese fiscal policy. The fiscal rule of the Maastricht Treaty had a si...

This paper discusses the need and scope for an active fiscal stabilization policy. It is argued that the effectiveness of fiscal policy as a short run stabilizer does not depend on the long run multipliers of (balanced budget) fiscal policies. To the extent that activity can be affected by aggregate demand in the short run, there is a case for a fiscal stabilization policy in terms of temporary...

The literature testing for long-run impacts of fiscal policy on growth at the macro level has generally ignored short-run dynamics and treated all counties’ fiscal-growth dynamics identically. This paper examines how robust previous ‘long-run’ results for OECD countries are to new empirical methods that model short-run dynamics and allow fiscal-growth responses to be heterogeneous both across c...

Is there a role for anonymous markets in which trades cannot be monitored by the government? We study an economy in which agents have private information and a benevolent government controls redistributive tax policy. While unrestricted access to anonymous markets reduces the set of policy instruments available to the government in general, it also limits the scope of inefficient redistributive...

This paper analyzes the growth impact of fiscal and institutional policies for alternative sizes of regions. The local government provides a public input that may be subject to relative congestion thus reducing its individual availability. Then private capital productivity is affected by the number of firms utilizing the governmental input. Institutional policies include the decision about the ...

The idea that a common monetary policy in a monetary union imposes costs when compared with independent policies at the country level is largely widespread in the literature. This result leads directly to a greater emphasis on national Þscal policies. We show in this paper that a common monetary policy has more power to asymmetrically affect countries than is usually stated in the literature. A...

There is no clear-cut evidence on how the adoption of the European fiscal standards influences discretionary fiscal policies within the Member States. This study investigates that phenomenon on the example of the 2004 enlargement. The results show that the effects of the adoption of EU fiscal rules bring a statistically significant change towards more countercyclical behavior. The results are r...

The literature has argued that developing countries are unable to adopt counter-cyclical monetary and fiscal policies due to financial imperfections and unfavorable politicaleconomy conditions. Using a world sample of 115 industrial and developing countries for 1984-2008, we find that the level of institutional quality plays a key role in countries' ability to implement counter-cyclical macroec...

The efficient decentralized provision of public goods requires that special interest groups, such as municipal unions, do not exercise undue influence on the outcome of municipal elections and local fiscal policies. We develop a new political economy model in which two politicians face each other in a local election. A union can endorse one of the candidates and thus influence the outcome of an...

This session of the conference is titled: “Fiscal Policy in a Monetary Union”. What is a central banker’s role in such a discussion? Well, Mervyn King once said: “Central banks are often accused of being obsessed with inflation. This is untrue. If they are obsessed with anything, it is with fiscal policy.” As so often, Mervyn King was right, we central bankers are indeed obsessed with fiscal po...