This paper investigates the past effectiveness of the Maastricht Treaty (MT) and Stability and Growth Pact (SGP) in disciplining fiscal policy in the Euro zone. We estimate fiscal reaction functions for a panel of 11 members of the Euro zone including the more recent period of the reformed SGP, and compare them with fiscal responses from other “industrialized” OECD countries. Our main finding i...

This paper examines the effects of the most recent U.S. housing bubble on the fiscal policy of California cities. We use an instrumental variables approach that helps isolate fiscal consequences of house price appreciation by taking advantage of the influence of local topological constraints on the elasticity of house prices with respect to interest rates. Our analysis generates three main find...

During the recent financial crisis, huge fiscal stimulus packages were initiated and bold actions were taken by monetary authorities in many countries. Inspired by these, I explore the impact of fiscal stimulus when I take financial friction and liquidity trap into account. In particular, I investigate the fiscal multiplier in a dynamic stochastic general equilibrium model which is featured wit...

In this paper we evaluate the sustainability of the current fiscal policy regime in Poland, which has been in place for almost 10 years since the start of the economic reform process. We use the intertemporal budget constraint (IBC) as a framework, and evaluate the sustainability of current policies. Consistency of fiscal policy with the IBC is evaluated using unit root and cointegration tests....

A petroleum fiscal system comprises the taxes, royalties, and similar terms in the lease or contract to explore for or produce oil and gas. A government, as seller of the rights, enacts its distinctive petroleum laws that provide for these terms, determining an offer price. Globally, a large variety of terms are in use, and the fiscal system can provide for an auction that determines the value ...

Article history: Received 16 August 2011 Received in revised form 5 February 2013 Accepted 12 February 2013 Available online xxxx This article examines the quantitative effects of the Chinese fiscal system on the increasing regional income inequality in China, from 1978 to 2007. Fiscal decentralization is a multifaceted concept not likely to be captured by a single measure. This paper investiga...

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...

Since the end of 2007, the world has experienced a sharp and deep decline in economic activity, which in this paper for the sake of brevity will be referred to as “the current recession.” The United States has initiated many costly and extensive policies to fight this recession that are likely to have detrimental effects on economic freedom in that country. This chapter considers these detrimen...

To understand the effect of fiscal policy on the private sector we have to comprehend how expectations about fiscal variables are formed. However, little is known about the way people form expectations about fiscal variables: no undercutting theory exists, not to say empirical evidence. The problem is that “expectations are unobservable” (Bertola and Drazen [BD93, p.16]). We generate observable...