The government fragmentation hypothesis (GFH) states that coalition governments spend more than single-party governments due to an underlying common pool problem. Using a large panel data set on 604 local governments in the German state of Baden-Württemberg for the 1994-2014 period, I test the...

Using a structural VAR analysis, we document that an increase in government purchases raises private consumption, total factor productivity (TFP) and the real wage. This poses a puzzle for both neoclassical and New-Keynesian models. We extend a standard New-Keynesian model to allow for skill...

Fiscal Responsibility Laws (FRLs) appear to be more popular in middle-income countries than advanced countries, even though their success is limited. The reasons why few advanced countries have a FRL include: the existing legal framework for the budget system is adequate; supranational rules and...

This paper studies how the effects of government spending vary with the economic environment. Using a panel of OECD countries, we identify fiscal shocks as residuals from an estimated spending rule and trace their macroeconomic impact under different conditions regarding the exchange rate...

In his letter to US President Franklin D. Roosevelt Keynes (1933) wrote about "the technique of recovery itself". An increase in output is brought about by an increase in purchasing power, Keynes argues, which can come from three sectors: households, firms and government. Using the IS/MY...

We study whether multiyear fiscal adjustment plans in 17 OECD countries during 1980-2011 have been associated with market pressure. We find that only a third (34 percent) of the consolidations occurred under market pressure, suggesting that market pressure is important but not the main element...

Structural budget-balance rules with countercyclical elements appear well suited to stabilize the macroeconomic volatility of oil-exporting countries and have been used successfully by other commodity exporters. Using a global DSGE model, the efficient design of such rules is found to depend on...

The purpose of the study is to examine Peru’s effective interest spread through accounting decompositions, financial ratio analysis, and spread regressions. The government’s financial restructuring programs accelerated the banking sector consolidation process. Robustness of...