In the last two decades the economic policy of several developing countries has often been characterized by perverse cycles of unsustainable policies and attempts at stabilization. A common feature of models designed to show how these delays in stabilizations can be explained in a way that is...

In several countries policymakers are striving to improve the budget balance. Trivially, this can be done by raising taxes and/or cutting expenditures. But the two strategies are not equivalent. In this paper, we investigate several issues referring to the relationship between the fiscal stance,...

This paper presents a model where income distribution and redistributive fiscal policy interact to affect the budget deficit and the pattern of net borrowing of a country. According to the standard representative agent paradigm, a small open economy should smooth consumption by borrowing from...

A fiscal program that redistributes income from rich to poor individuals indirectly redistributes tax revenues from regions hit by a favorable shock to regions hit by an unfavorable one. Centralized fiscal redistribution has therefore been advocated as a way to insure individuals against...

This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. In particular, we investigate how different types of fiscal policy affect profits and , as a result, investment. We find a sizable negative effect of public spending -- and in particular of its...

This paper successfully tests on a sample of 71 countries for the period 1960–85 the following hypotheses. Income inequality, by fuelling social discontent, increases sociopolitical instability. The latter, by creating uncertainty in the politico-economic environment, reduces investment....

Government spending at the zero lower bound (ZLB) is not necessarily welfare enhancing, even when its output multiplier is large. We illustrate this point in the context of a standard New Keynesian model. In that model, when government spending provides direct utility to the household, its...