We develop a dynamic recursive model where political and economic decisions interact, to study how excessive debt-GDP ratios affect political sustainability of prudent fiscal policies. Rent seeking groups make political decisions - to cooperate (or not) - on the allocation of fiscal budgets...

This paper attempts to analyze the role of taxes on property in containing asset bubbles and its consequent recessionary impact, by developing a framework, wherein the housing market is conceived as consisting of several sub-markets i.e. rental housing market, house resale market, new...

One of the most progressive and innovative approaches to public investment financing is known as value capture. Value-capture envisions creation of the policy tools to adequately capture the privately accruing changes in the value of sites and/or consumption that arise from public infrastructure...

Are budget deficits bad for an economy? This question has perplexed economists for centuries. Essentially, there are three schools of thought on this matter. One school takes the position that deficits have adverse influence on inflation, interest rates and private investment. Also, as yearly...

Most party systems have seen a considerable rise in polarization during the past decades. We show that fiscal policies have contributed to this development. Our macro-level analysis of 166 elections since 1980 finds that austerity increases both electoral abstention and votes for non-mainstream...

We examine the relationship between public sector efficiency and government spending, to assess public resource management across the 27 European Union countries. Specifically, we analyze the growth of public expenditure in relation to outcomes across various public sector performance (PSP)...

Long-term interest rates of small open economies correlate strongly with the US long-term rate. Can central banks in those countries decouple from the US? An estimated DSGE model for the UK (vis-`a-vis the US) establishes three structural empirical results. (1) Comovement arises due to nominal...

What policy space does a country have for a short-term response to a catastrophic event? To quantify this space, the paper proposes a policy space index. The index combines a quantitative, albeit relatively limited and narrow, fiscal space concept with the indicators of nominal monetary space...

This paper provides a somewhat intertemporal microfoundation for IS-LM in an economy where there is a monopoly issuer of medium of exchange, money. The core microfoundation in this model comes from the Arrow-Debreu general equilibrium result that riskless interest rate may not be uniform across...

We study fiscal behaviour and the sovereign yield curve in the U.S. and Germany in the period 1981:I-2009:IV. The latent factors, level, slope and curvature, obtained with the Kalman filter, are used in a VAR with macro and fiscal variables, controlling for financial stress conditions. In the...