This paper investigates the inter-linkages between financial stability and fiscal policy. It analyzes the effect of selected financial stability indicators on the probability of future debt deterioration, controlling for several macroeconomic variables. We find significant evidence that a...

This paper surveys the sovereign debt literature and summarizes the political economy trade-offs of seven distinct mechanisms for achieving debt sustainability. Two mechanisms – financial aid and asset exchange – are often underemphasized or entirely overlooked even though they can play an...

This chapter presents the results of the comprehensive literature survey and supportive empirical assessment of the potential impacts of the Financial Transactions Tax recently adopted by the European Commission in response to the significant financial sector misallocations arising from the...

This study analyzes the effect of a money-financed policy for fiscal reform. We introduce a realistic setting in which real output is not given by an exogenous variable, but is determined by effective demand in a monetary growth model. Using this model, we compare the effects of the...

This paper examines UK sovereign debt sustainability following the Second World War. Even though the UK in 1946 recorded the highest public debt-to-GDP ratio of the 20th century, the sovereign credit literature does not show a UK sovereign default following the Second World War. New archival...

We investigate open economy dimensions of optimal monetary and fiscal policy at the zero lower bound (ZLB) in a small open economy model. At positive interest rates, the trade elasticity has negligible effects on optimal policy. In contrast, at the ZLB, the trade elasticity plays a key role in...

A disagreement has emerged over whether advanced countries such as Britain engaged in financial repression following the Second World War. A review of the historical and archival evidence identifies eleven pieces of British legislation and sixteen directives that supported financial repression...

The eurozone debt crisis has now reached a turning point. This Policy Brief argues for a more organised intervention by the European Central Bank (ECB) to stop contagion through the creation of a quantitative easing programme, coupled with a political agreement among member states for a more...

This paper reviews the performance of the euro area since the euro's launch 20 years ago. It argues that the euro crisis has exposed existential flaws in the euro regime. Intra-area divergences and the corresponding buildup of imbalances had remained unchecked prior to the crisis. As those...

This note summarizes the outline of "money-financed policy." We review some policies for improving fiscal balance, and insist that money-financed policy has the greatest potential to increase social welfare as compared to other policies.Also, we show the effect of money-financed policy on GDP...