Fiscal policy has been of significant size in Japan since the early 1990s, propelling Japan to the forefront of fiscally-challenged nations. However, the effect of fiscal policy has been disappointing. This paper discusses the various explanations provided by the literature (the argument that fiscal policy was effective; the argument that it was not effective, because of interest rate-based cro...

As economics has developed, a number of different fiscal principles have been suggested. Perhaps the oldest principle was that the Government should balance its books. This principle was adopted by the 1979 Conservative Government but they delivered a budget in balance or in surplus only in 1988/89 and 1989/90. The same principle has been adopted in the Stability and Growth Pact, albeit with an...

This paper studies the design of monetary policy in a fiscal federation, such as the European Union. The focus of the analysis is the interaction between the fiscal policy of member countries (regions) and the monetary authority. Each of the countries structures its fiscal policy (spending and taxes) with the interests of its citizens in mind. Thus each country perceives a gain to shifting its ...

This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. The theory is similar in spirit to, but distinct from, unpleasant monetarist arithmetic and the fiscal theory of the price level. Because the assumption of imperfect knowledge breaks Ricardian equivalence, details of fiscal policy, such as the average scale and composition of the publi...

In this section, we briefly explore some issues surrounding the interactions between monetary policy and fiscal policy. In developed countries, monetary-policy-setting is effectively “independent” from fiscal-policy-setting, in the sense that separate authorities control the two types of policy-making. For example, Federal Reserve policy-makers are not the same as Congressional policy-makers. E...

Fiscal policy measures are a key means by which governments can influence distribution and poverty, but in fact the relationships between fiscal policy and poverty are not well understood. The most commonly used technique for assessing the distributional impact, benefit incidence analysis, is straightforward, but applied by itself it suffers from a number of serious limitations. Assessment of t...

Do preferences toward globalization strategies vary across publicfinance regimes? In this paper, we use data on individual preferences toward immigration and trade policy to examine how pre-tax and posttax cleavages differ across globalization strategies and state fiscal jurisdictions. High exposure to immigrant fiscal pressures reduces support for freer immigration among U.S. natives, especial...

Fiscal policy measures are a key means by which governments can influence distribution and poverty, but in fact the relationships between fiscal policy and poverty are not well understood. The most commonly used technique for assessing the distributional impact, benefit incidence analysis, is straightforward, but applied by itself it suffers from a number of serious limitations. Assessment of t...

The objective of this paper is to evaluate the effectiveness of fiscal policy in emerging countries in periods of crisis. We study the effect of fiscal policy on economic activity distinguishing between periods of recession and expansion periods. Our goal will be to explore the nonlinear effect of fiscal policy in Asian emerging countries on the activity during periods of crisis. We use the PST...

The paper shows that common fiscal rules, such as a limit to the deficit-output ratio, induce an ‘‘escape clause’’–type fiscal policy, similar to that studied for monetary policy by Flood and Isard (1988 and 1989) and Lohmann (1992): The government resorts to an active stabilization (for example, countercyclical) policy only during ‘‘exceptional times’’ by running deficits in recession phases a...