Fiscal Policy assumes a central place in the overall macroeconomic framework. As government sector and private sector compete for resources and for consumption in the economy, fiscal policy needs to be designed in a framework where an increase in government activity would result in net gains to the economy even when it may negatively impact in private sector activity, or reduce foreign exchange...

Paper examines the problem of choice of an optimal fiscal rule in the long run. An ideal rule would typically assure fair distribution of utility over generations, while allowing to maintain the sustainable fiscal position. Three commonly used types: debt, deficit and expenditure rules are considered. The main conclusion is that only the modified deficit rule fulfils the assumptions. The rule r...

Based on a panel data model this paper investigates whether the effects of fiscal policy on national saving in Europe have changed after the Maastricht Treaty came into force. Recently Giavazzi, Jappelli and Pagano (2000) found evidence that national saving responds nonlinearly to fiscal policy when a large and persistent consolidation is undertaken. I show that their finding is not robust, one...

This paper summarizes the results of a large recent literature on multi year fiscal plans for deficit reduction (austerity). The key results are that deficit reduction policies based upon spending cuts are much less costly in terms of short run output losses than tax based adjustments. . On average fiscal adjustment based upon spending cuts have very samll otput costs and in come cases they are...

Most of the discussion about fiscal stimulus focuses on the multiplier of government spending on impact. In this paper we shift the focus to the multiplier at the end, i.e. to the period in which a deficit spending program terminates. We show that recent time series analyses as well as economic models of different schools of thought predict that the multiplier turns negative before spending exp...

Private saving behaviour has important consequences for the effectiveness of fiscal policy... Fiscal policy has been used as an antidote to weak activity during the most recent downturn and fiscal consolidation has been delayed in some countries because of its perceived costs in terms of lower activity. However, the impact of fiscal policy on aggregate demand depends on the responses of private...

Our work in the Czech Republic and in FYR Macedonia demonstrates the importance of including contingent liabilities when assessing the magnitude of the true fiscal adjustment, and when analyzing fiscal sustainability. To the extent that explicit expenditures are shifted off-budget or replaced by the issuance of guarantees, the achieved improvement in fiscal balances is overstated. For the Czech...

We study a fiscal policy model in which the government is present-biased towards public spending. Society chooses a fiscal rule to trade off the benefit of committing the government to not overspend against the benefit of granting it flexibility to react to privately observed shocks to the value of spending. Unlike prior work, we characterize rules that are self-enforcing: the government must p...

Abstract Debate around Wales’ place in the United Kingdom has intensified over recent years, with radically differing visions for union of Welsh and UK governments emerging alongside growing (though still minority) support independence. This article argues that these constitutional debates must be considered current fiscal position. estimated deficit is reflective long-standing economic underpe...

Budget deficit constitutes a major fiscal indicator. It has major important ramification on macro-economic position of all nations. In developing countries generally, and in Iran specifically, governments are likely to spend more on miscellaneous as well as differentiated obligations causing high expenditure costs with respect to their limited revenues. This causes a budget deficit to incur. Th...