We investigate what happens when the fiscal authorities do not react to rising public debt so that the unpleasant task of fiscal sustainability falls upon the Central Bank (CB). In particular, we explore whether the CB's bond purchases in the secondary market can restore stability and...

This paper studies the difference between public production and public finance of public goods in a dynamic general equilibrium setup. By public finance, we mean that the public good is produced by private providers with the government financing their costs. When the model is calibrated to match...

This paper first searches for the drivers of the Greek depression in the aftermath of the 2007-8 global crisis and in turn looks for engines of sustained growth. We use a micro-founded macroeconomic model calibrated to Greece. Our simulations show that the adopted adjustment program (namely, the...

This paper first searches for the drivers of the Greek depression in the aftermath of the 2007-8 global crisis and in turn looks for engines of sustained growth. We use a micro-founded macroeconomic model calibrated to Greece. Our simulations show that the adopted adjustment program (namely, the...

This paper incorporates an uncoordinated struggle for extra fiscal favors into an otherwise standard Dynamic Stochastic General Equilibrium model. This reflects the popular belief that interest groups compete for privileged transfers and tax treatment at the expense of the general public...

We welfare rank various tax-spending policies. The setup is a New Keynesian model of a semi-small open economy featuring sovereign risk premia and loss of monetary policy independence. The model is calibrated to match data from the Italian economy 2001-2011. We compute various optimized...

We build a new Keynesian DSGE model consisting of two heterogeneous countries participating in a monetary union. We study how public debt consolidation in a country with high debt (like Italy) affects welfare in a country with solid public finances (like Germany). Our results show that debt...

We reconsider the conventional wisdom that, in the presence of public goods and distortionary taxation, Nash tax rates are inefficiently low due to free riding. We use a model in which the public good is natural resources. Specifically, a general equilibrium model of a world economy, in which...

This paper shows that whether pollution occurs as a by-product of economic activity (which is supposed to be the case in DCs), or as resource extraction (which is supposed to be the case in LDCs), matters for the dynamics of the optimal growth-environment-policy link. The context is a dynamic...

This short paper reconsiders the popular result that the lower the probability of getting reelected, the stronger the incumbent politicians' incentive to follow short-sighted, inefficient policies. The set-up is a general equilibrium model of endogenous growth and optimal fiscal policy, in which...