Economic uncertainty is an important factor behind macroeconomic fluctuations: in an uncertain environment, firms reduce hiring and investment, financial intermediaries are more reluctant to lend and households increase their propensity to save. In the present paper, we study the effects of the...

In this paper we examine the sustainability of euro area public finances against the backdrop of population ageing. We critically assess the widely used projections of the Working Group on Ageing Populations (AWG) of the EU's Economic Policy Committee and argue that ageing costs may be higher...

We derive the optimal fiscal policy for a government that is committed to honoring its debt but faces investors which fear a sovereign default. We assume that investors are able to learn from new evidence, as in Marcet and Sargent (1989), so that they can gradually correct their overly...

We compute the value of the net taxes that current policies impose to present and future generations of Italians. We use such figures to show that current fiscal policies are neither financially sustainable nor fair to future generations. This is due to the generous treatment awarded to past and...

To contrast the severe global recession of 2009, governments in most advanced countries implemented expansionary fiscal policies leading to a steep increase in public debt. As economies recover, a critical choice is whether to stabilize debt at post-crisis levels, or to bring it down to...