This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality condition for the GDP growth rate (i.e. the GDP growth...

This paper develops an arbitrage-free affine term structure model of potentially defaultable sovereign bonds to model a cross-section of eight euro area government bond yield curves since January 1999. The existence of a common monetary policy under European Monetary Union determines the short...

In this paper, we analyze the impact fiscal policy rules have on budget deficits and forecasting biases in official budget outlooks. Persistent budget deficits and over-optimistic budget forecasts have been observed in many countries in the past, especially in the euro area. To prevent such...

This paper formulates a dynamic Random Coefficient Model (RCM) to consider a set of popular determinants of public deficits in the EU-15 over the period 1971-2006, both at a country-specific level and from a population-wide perspective. Although the extent of government deficits and debt has...

To enrich the debate about the fiscal effectiveness of sovereign wealth funds, this paper explores the effect of sovereign wealth funds (more precisely sovereign oil funds, SOFs) on the government spending in real term and as a share of GDP. First, we evaluate the relationship between the...

Debt-financed fiscal stimulus programmes directly stimulate aggregate demand through government expenditure or tax cuts, but their effectiveness is highly dependent on direct crowding out of private sector expenditure, spillover effects to the private sector through a higher risk premium on...

This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality condition for the GDP growth rate (i.e. the GDP growth...

The fiscal deficit is "ill defined"; it is "without theoretical background"; it is "a number in search of a concept". Such judgements are characteristic of a prominent part of the literature on the new measurement concept of generational accounting. This paper argues that such criticism is...

The large Public Sector Purchase Programme (PSPP) which the ECB started in 2015 on the basis of monetary policy purposes, had major side-effects on fiscal policy. One concerns the programme´s uncommon seigniorage effects. We find that the PSPP not only led to partly negative seigniorage gains,...

James Buchanan pioneered the political economics of public debt 60 years ago. In this paper, we contrast his thinking of the burden of debt, the public choice mechanisms that lead to excessive debt and the demand for constitutional restraints on public debt with its development, its...