This paper discusses different empirical tests of public sector solvency and applies them to a sample of 18 OCED countries. Provided that the government solvency constraint need to be imposed, these tests develop from the idea of verifying whether the intertemporal budget constraint of the...

We provide a model for analyzing effects of the tax system and spending programs on the determination of government spending and taxpayer welfare and show that tax system or spending program which is suboptimal from a Ramsey point of view can improve taxpayer welfare because the system creates...

This paper demonstrates that there is a robust empirical association between the extent to which an economy is exposed to trade and the size of its government sector. This association holds for a large cross-section of countries, in low- as well as high-income samples, and is robust to the...

One possible explanation for the difficulty in controlling the budget is that a major component of spending --tax expenditures--receives privileged status. It is treated as tax cuts rather than spending. This paper explores the implications of that classification and illustrates how it can lead...

This paper employs a new empirical approach for identifying the impact of government spending on the private sector. Our key innovation is to use changes in congressional committee chairmanship as a source of exogenous variation in state-level federal expenditures. In doing so, we show that...

The fiscal theory of the price level (FTPL) has been active for 30 years, and the interest in this theory grew with the recent global surges in inflation and government spending. This study applies the FTPL to 37 OECD countries for 2020-2022. The theory's centerpiece is the government's...

Based on a sample of 56 countries, we find that while fiscal policy in the G-7 countries appears to be broadly consistent with Barro's tax smoothing proposition, in developing countries government spending and taxes are highly procyclical (i.e., government spending rises and taxes fall during...

This paper investigates the long- and short-run determinants of the real exchange rate using a panel of data for fourteen OECD countries. The data are analyzed using time series and panel unit root and panel cointegration methods. Two dynamic productivity-based models are used to motivate the...

This paper considers budget expansions and adjustments in OECD countries in the last three decades. Our main results are: i) on average fiscal expansions are the results of increases in expenditures, particularly of transfer programs, while contractions are typically due to tax increases; ii)...

This paper analyses the effects of fiscal policies on rates of interest and wealth in the world economy. Uncertainty concerning the length of life yields an equilibrium in which private and social rates of discount differ and budget deficits exert real effects. It is shown that a current budget...