Despite the single currency, yields on government bonds in the Euro Area deviate substantially from German bond yields. These bond spreads are usually attributed to differing default and liquidity risks. The empirical literature documents that evaluation of these risks is subject to time variation in global factors approximated by US corporate bond spreads or short term interest rates. Within t...

In the 1970s, taxation of "windfall" profits from primary products and intervention in trade and production tempted governments into expansionary fiscal policies, whilst stifling the private sector and depressing growth. However, the experience of the recent coffee boom has so far been more favourable: those African countries which liberalized and left a large share of the “windfall” with the p...

According to the financial accelerator model, a small monetary or other shock is amplified through credit market restrictions on small firms, and swings in balance sheets over the business cycle cause swings in small firms’ spending. This paper incorporates these notions in an empirical model of firm behavior. We use unit transaction cost of debt and rationed credit as indicators of balance she...

We study optimal government policy in an economy where (i) search frictions create a coordination problem and generate multiple Pareto-ranked equilibria and (ii) the government finances the provision of a public good by taxing trade. The government must choose the tax rate before it knows which equilibrium will obtain, and therefore an important part of the problem is determining how the policy...

What are the impacts on household incomes of the major economic downturn that occurred in almost all OECD countries starting in late 2007? This paper is a condensed version of a public lecture given at the University of Melbourne in honour of R. I. Downing. It draws on a study of 21 rich countries using data from national accounts, household surveys, and other sources. The headline findings are...

This study investigates the dynamics of fiscal policy and economic stabilization using a panel dataset from Sub-Saharan Africa (SSA) sourced World Development Indicators (WDI) between 1985 2019. The utilized vector error correction model (VECM) rather than autoregression (PVAR) after ascertaining presence cointegrating equations (existence long-run relationships). Also, both homogenous heteroge...

The purpose of this study is to provide a macroeconomic analysis of fiscal policy in the Czech Republic during the transformation period 1989-1995. In contrast to those studies which are based on “decline accounting”, disentangling different factors from each other and ascribing to them specific roles in the overall decline, this study focuses exclusively on fiscal policy and tries to identify ...

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper investigates the relation between growth forecast ...

This paper quantitatively investigates the optimal capital income taxation in the general equilibrium overlapping generations model, which incorporates characteristics of housing and the U.S. preferential tax treatment for owner-occupied housing. Housing tax policy is found to have a substantial effect on how capital income should be taxed. Given the U.S. preferential tax treatment for owner-oc...