We analyse the poisonous interaction between bank rescues, financial fragility and sovereign debt discounts. In our model balance sheet constrained financial intermediaries finance both capital expenditure of intermediate goods producers and government deficits. The financial intermediaries face...

We investigate the effectiveness of "Keynesian" fiscal stimuli when government deficits and debt rollovers are (possibly partially) financed by balance sheet constrained financial intermediaries. Because financial intermediaries operate under a leverage constraint, deficit financing of fiscal...

The potential interactions among fiscal policies, investments and economicgrowth are complex and manifold.In this paper, we will perform a systematic comparative analysis of the variouseconomic insights that arecurrently available on these complex relationships, both theoretically (by aselective...

The issue of whether the public sector enhances or retards long-run economic growth has been debated passionately in recent years. In this paper we use meta-analysis to shed light on the issue. A sample of 93 published studies, yielding 123 meta-observations, is used to examine the robustness of...

This paper examines the pricing of public debt in a quantitative macroeconomic model with government default risk. Default may occur due to a fiscal policy that does not preclude a Ponzi game. When a build-up of public debt makes this outcome inevitable, households stop lending such that the...