We analyze the conditions for public debt-to-GDP ratio stability extending Domar’s approach by including interaction between government’s reaction function and private sector’s function, considering impact of 2020–2021 pandemic shock monetary fiscal policy responses, with simulations applied to Italian case. The outcomes numerical show crucial importance ECB extraordinary policies, NGEU and, le...

In this paper we first describe the stochastic optimal control algorithm called ((OPTCON)). The algorithm minimizes an intertemporal objective loss function subject to a nonlinear dynamic system in order to achieve optimal value of control (or instrument) variables. Second as an application, we implemented the algorithm by the statistical programming system ((GAUSS)) to determine the optimal fi...

This paper investigates the macroeconomic challenges created by a surge in aid inflows. It develops an analytical framework for examining possible policy responses to increased aid, in terms of absorption and spending of aid—where the central bank controls absorption through monetary policy and the sale of foreign exchange and the fiscal authority controls spending. Different combinations of ab...

background fiscal decentralization (fd) in many cases is encouraged as a strong means of improving the efficiency and equity in the provision of public goods, such as healthcare services. this issue has urged the researchers to experimentally examine the relationship between fiscal decentralization indicators and health outcomes. in this study we examine the effect of fiscal decentralization in...

Fiscal Competition and the Composition of Public Spending: Theory and Evidence In this paper, we consider fiscal competition between jurisdictions. Capital taxes are used to finance a public input and two public goods, one which benefits mobile skilled workers and one which benefits immobile unskilled workers. We derive the jurisdictions’ reaction functions for different spending categories. We...

This paper examines the different types of incentives that countries face when deciding to take part in a federal fiscal system. The optimal degree of participation depends on the structural parameters of the economy and on the properties of the federal fiscal system. Firstly, the paper examines the case of federal fiscal systems that work as simple insurance arrangements. Secondly, a mixed ins...

Tax competition in the European Union is fierce. Especially since the entry of the new member States, tax reforms in the ”old” Europe are frequent. In this paper we formally test the presence of strategic tax setting in the old EU14 as a reaction to the tax rates in the new member states using a fiscal reaction function. We first develop a simple model of spatial tax competition that predicts a...