We analyze politicians’ expectations about future compliance with a fiscal rule, and in particular the dependence of the expectations on their role in parliament (opposition vs. incumbent government coalition). We study this in the context of the German debt brake, which became a...

Fiscal rules have become popular to limit deficits and high debt burdens in industrialized countries. A growing literature examines their impact based on aggregate fiscal performance. So far, no evidence exists on how fiscal rules influence deficit expectations of fiscal policy makers. In the...

The present paper analyzes expectations of German politicians about the German debt brake (Schuldenbremse), which became part of the German constitution in 2009. This fiscal rule requires the federal government and the German states to run a (cyclically adjusted) budget deficit of no more than...

Fiscal rules have become popular to limit deficits and high debt burdens in industrialized countries. A growing literature examines their impact based on aggregate fiscal performance. So far, no evidence exists on how fiscal rules influence deficit expectations of fiscal policy makers. In the...

We study a fiscal policy model in which the government is present-biased, leading to an excessive public deficit. An optimally designed fiscal rule needs to trade off the benefit of committing the government to not overspend against the benefit of granting it flexibility to react to shocks to...

The controversy about sovereign debt cuts loomed prominently throughout crisis in the European Union (EU), as the EU legal rules were viewed to impose strict limitations on debt restructuring involving public creditors due to moral hazard concerns enshrined in the legal ban on bailouts. This...