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Historical data on US debt and primary surplus suggest the existence of different fiscal regimes which implythat, from time to time, US fiscal policy may have violated the government's intertemporal budget constraint.But does evidence of locally unsustainable regimes eventually jeopardize the global sustainability of US publicdebt? We apply a Regime-Switching Model-Based Sustainability test which derives sufficient conditions on aregime-switching fiscal policy feeback rule such that fiscal policy can globally be sustainable while allowing forpersistent unsustainable regimes. We find significant evidence of a globally Ricardian US fiscal policy, despiteperiodic and persistent unsustainable fiscal regimes. This conclusion remains valid after controlling for thereverse causality between the primary balance and the output gap.

Historical data on US debt and primary surplus suggest the existence of different fiscal regimes which implythat, from time to time, US fiscal policy may have violated the government's intertemporal budget constraint.But does evidence of locally unsustainable regimes eventually jeopardize the global sustainability of US publicdebt? We apply a Regime-Switching Model-Based Sustainability test which derives sufficient conditions on aregime-switching fiscal policy feeback rule such that fiscal policy can globally be sustainable while allowing forpersistent unsustainable regimes. We find significant evidence of a globally Ricardian US fiscal policy, despiteperiodic and persistent unsustainable fiscal regimes. This conclusion remains valid after controlling for thereverse causality between the primary balance and the output gap.

For multiple decades, activists have sought to institute an international legal regime that limits the ability of despotic governments to borrow money and then shift those obligations onto more democratic successor governments. Our goal in this article is to raise the possibility of an alternate legal path to raising the costs of borrowing for despotic regimes. All countries have systems of domestic laws that regulate agency relationships and try to deter corruption; otherwise the domestic economy would not function. Despotic governments, we conjecture, are especially likely to engage in transactions that are legally problematic. The reason being that despotic governments, by definition, lack the support of the populace; meaning that there is a high likelihood that actions that they take on behalf of the populace can be challenged as unrepresentative and contrary to the interests of the true principals. The foregoing conditions, if one translates them into the context of an ordinary principal-agent relationship, would constitute a voidable transaction in most modern legal systems. That means that if opposition parties in countries with despotic governments today were to monitor and make public the potential problems with debt issuances by their despotic rulers under their own local laws, it would raise the cost of capital for those despots. To support our argument, we use both the concrete example of the debt issuance shenanigans of the Maduro government in Venezuela and a more general analysis of the relationship between corruption, democracy and a nation's borrowing costs.

THE GREAT CHALLENGE OF THE NEXT CENTURY WILL BE TO REINTRODUCE REALITY INTO AMERICAN POLITICAL RHETORIC. FOR A CENTURY, AMERICAN SOCIETY HAS BEEN CHARACTERIZED BY THE BELIEF THAT EVER-RISING CONSUMPTION SUSTAINED BY ECONOMIC EXPANSION IS BOTH THE MEANING OF INDIVIDUAL EXISTENCE AND THE GOAL OF PUBLIC POLICY. THIS BELIEF HAS BECOME SO IMPORTANT THAT AMERICANS CANNOT FACE GIVING IT UP. AS THE REAGAN PRESIDENCY DEMONSTRATES, AMERICANS WOULD SOONER BELIEVE LIES AND INCUR MASSIVE PUBLIC DEBTS.

A timely and incisive look at austerity measures that succeed-and those that don'tFiscal austerity is hugely controversial. Opponents argue that it can trigger downward growth spirals and become self-defeating. Supporters argue that budget deficits have to be tackled aggressively at all times and at all costs. In this masterful book, three of today's leading policy experts cut through the political noise to demonstrate that there is not one type of austerity but many.Looking at thousands of fiscal measures adopted by sixteen advanced economies since the late 1970s, Austerity assesses the relative effectiveness of tax increases and spending cuts at reducing debt. It shows that spending cuts have much smaller costs in terms of output losses than tax increases. Spending cuts can sometimes be associated with output gains in the case of expansionary austerity and are much more successful than tax increases at reducing the growth of debt. The authors also show that austerity is not necessarily the kiss of death for political careers as is often believed, and provide new insights into the recent cases of European austerity after the financial crisis.Bringing needed clarity to one of today's most challenging subjects, Austerity charts a sensible approach based on data analysis rather than ideology

Over the past four decades, the accumulation of policy legacies and public debt has led to a decline in fiscal flexibility in Germany and the United States. By applying an index of fiscal democracy to Germany, the paper illustrates the associated shrinkage of democratic control over budget priorities and compares the developments in both countries.

Time has run out for democratic sovereignty in the now bygone era of neoliberal governmentality and the time "bought" in the thirty year period after the Second World War with social Welfare State policies is the price we now have to pay in terms of public debt and distributional conflict in an irreversible crisis of representative democracy

The UK government adopted International Financial Reporting Standards (IFRS) in 2009/10. Compared with the UK GAAP, most of the accounting changes under IFRS related to Project Finance (PF). In this paper we examine the economic consequences of IFRS adoption in the UK public sector, specifically on the cost of PF financing and on earnings management by public sector grantors. We present evidence to show that the majority of public sector grantors experience a lower PF debt spread after the IFRS adoption. Our evidence further indicates earnings management because grantors possessing high-value PF related depreciable assets are more likely to impair these assets after IFRS adoption. The results are robust across several model specifications and sensitivity tests. Collectively, these results provide timely insights on the benefits and costs of IFRS adoption by governments and should therefore be of interest to both regulators and policymakers. Implications of this study extend to the effects of adopting International Public Sector Accounting Standards by governments.

El endeudamiento excesivo de los gobiernos subcentrales se considera uno de los peligros de la descentralización fiscal. Por otra parte, la descentralización podría garantizar la estabilidad fiscal del sector público al restringir los gobiernos "Leviatánicos". Dado que el impacto de la descentralización fiscal sobre la deuda pública y sobre los resultados fiscales es ambiguo desde un punto de vista teórico, se analiza esta cuestión empíricamente con un panel de 8 países federales y cuasifederales, con medidas solo regionales de la descentralización para el período 1990-2011, y otro panel de 18 países federales y no federales, con medidas tanto regionales como locales de la descentralización para el periodo de 1980-2011. Nuestros hallazgos sugieren que la descentralización regional aumenta la deuda pública, mientras que la descentralización local la reduce. Asimismo, el tamaño del Sector Público también incrementa dicha deuda, mientras que el saldo primario parece tener una relación negativa, siendo las demás variables no significativas. ; Excessive borrowing by subnational governments is considered to be one of the perils of fiscal decentralization. On the other hand, fiscal decentralization might ensure the fiscal stability of the public sector by constraining Leviathan governments. Since the impact of decentralized government on fiscal outcomes is therefore ambiguous from a theoretical perspective, we explore this question empirically with a panel of 8 federal countries, with only regional decentralization measures over 1990-2001 period, and another panel of federal and non-federal countries, both regional and local measures of decentralization over the 1980-2011 period. Our findings suggest that regional decentralization increases public debt, while local decentralization reduces it. Also, the size of Public Sector increases the debt, while the primary balance seems to have a negative relationship, with no other significant variables.

Ministries of finance are often asked to guarantee a state-owned electricity utility's payments to an independent power producer under a power-purchase agreement. To decide whether to grant the guarantee, the ministry should have at least a rough estimate of the guarantee's expected cost. Making use of an analogy between a power-purchase agreement and a debt contract, this paper shows how the ministry can get such an estimate by applying a method developed to estimate the expected cost of debt guarantees. An estimate of the probability of the utility's not being able to meet its obligations under the power-purchase agreement can be derived from the utility's actual or estimated credit rating in the absence of government support. The government's expected payments under the guarantee can then be estimated by multiplying the utility's payments under the power-purchase agreement by this probability. The estimates produced by the method will be imprecise, but the method may be easier to apply than alternative methods, and an imprecise estimate may be better for policy makers than no estimate.

The study deals with financing state expenditures and war economy of the Third Reich during the SecondWorldWar. Based on macroeconomic analysis of economic development in relation to the concept of total war, the changes in the German economy allowing Nazis' war efforts to continue are analyzed. The effect of replacing private interests with government goals manifested in volume and structure of household consumption and firms' investments, distorted industrial production and labour market, etc. The study points out changes in the development of financial (and partially nonfinancial) coverage of abnormally growing budgetary expenditures of central government after 1939. Special attention is paid to the analysis of financing war expenditures in Germany, including revenue from occupied territories and the role of the financial system. Especially, for more intensive debt financing was underway since the non-debt ways were not sufficient enough from 1943. An important finding, inter alia, is that growing government debt was for the most part covered from domestic sources, such as retracting savings from the financial system and excessive money creation. Within domestic economy the German government preferred "hidden" sources of funding over public issues of state bonds. On average, about a half of government outlays during the war were covered by non-debt resources – taxes, customs, or payments of occupational costs.

Purpose
– The purpose of this article is to empirically explore the sensitivity of payouts to cash flows and the other financing decisions, such as debt and investment, of firms.


Design/methodology/approach
– Using panel regressions based on COMPUSTAT data for 7,544 public firms during the period 1973–2013, we estimate the sensitivity of total payouts. Specifically, following the theory presented in Lambrecht and Myers (2012), we test the interdependent financing decisions of the firm. First, we compute total payout as the sum of cash dividends and net stock repurchases; second, we examine the sensitivity of total payouts to changes in the firm's net income, debt and investment. Furthermore, we present several tests to demonstrate the robustness of our results.


Findings
– We suggest evidence in support of the theory in Lambrecht and Myers (2012) showing that there is a negative relationship between total payouts and investment. Furthermore, we find that total payouts are positively associated with net income and debt of the firm.


Originality/value
– Previous research has shown how cash flows affect different financing decisions, but it is not clear how total payouts are sensitive to other financing decisions. The focus of this paper is the response of total payouts to investment policy, debt financing policy and changes in cash flows.

Europe went through the most severe economic crisis of its recent history following the global financial crisis of 2008. Hence, this thesis aims to empirically identify the determinants of this crisis within the framework of 15 core EU member countries (EU-15). To do so, the study develops a continuous fiscal stress index, contrary to previous empirical studies that tend to use event-based crisis indicators, which identifies the debt crises in the EU-15 and the study employs three different estimation techniques, namely Self-Organizing Map, Multivariate Logit and Panel Markov Regime Switching models. Our estimation results show first that the study identifies correctly the time and the length of the debt crisis in each EU-15-member country by developing a fiscal stress index. Empirical results also indicate, via three different models, that the debt crisis in the EU-15 is the consequence of deterioration of both financial and macroeconomic variables such as nonperforming loans over total loans, GDP growth, unemployment rates, primary balance over GDP, and cyclically adjusted balance over GDP. Besides, variables measuring governance quality, such as voice and accountability, regulatory quality, and government effectiveness, also play a significant role in the emergence and the duration of the debt crisis in the EU-15. As the econometric results clearly indicate the importance of fiscal deterioration on the occurrence of the European debt crisis, this study also aims to test the fiscal convergence among the EU member countries. The results indicate that Portugal, Ireland, Italy, Greece, and Spain diverge from other EU-15 countries in terms of public debt-to-GDP ratio. In addition, results also show that all PIIGS countries except for Greece converge to EU-10 in terms of budget deficit-to-GDP ratio. ; L'Europe a subi la crise la plus sévère de sa récente histoire à la suite de la crise financière globale de 2008. C'est pourquoi cette thèse a l'objectif d'identifier de façon empirique les déterminants de cette crise ...

Europe went through the most severe economic crisis of its recent history following the global financial crisis of 2008. Hence, this thesis aims to empirically identify the determinants of this crisis within the framework of 15 core EU member countries (EU-15). To do so, the study develops a continuous fiscal stress index, contrary to previous empirical studies that tend to use event-based crisis indicators, which identifies the debt crises in the EU-15 and the study employs three different estimation techniques, namely Self-Organizing Map, Multivariate Logit and Panel Markov Regime Switching models. Our estimation results show first that the study identifies correctly the time and the length of the debt crisis in each EU-15-member country by developing a fiscal stress index. Empirical results also indicate, via three different models, that the debt crisis in the EU-15 is the consequence of deterioration of both financial and macroeconomic variables such as nonperforming loans over total loans, GDP growth, unemployment rates, primary balance over GDP, and cyclically adjusted balance over GDP. Besides, variables measuring governance quality, such as voice and accountability, regulatory quality, and government effectiveness, also play a significant role in the emergence and the duration of the debt crisis in the EU-15. As the econometric results clearly indicate the importance of fiscal deterioration on the occurrence of the European debt crisis, this study also aims to test the fiscal convergence among the EU member countries. The results indicate that Portugal, Ireland, Italy, Greece, and Spain diverge from other EU-15 countries in terms of public debt-to-GDP ratio. In addition, results also show that all PIIGS countries except for Greece converge to EU-10 in terms of budget deficit-to-GDP ratio. ; L'Europe a subi la crise la plus sévère de sa récente histoire à la suite de la crise financière globale de 2008. C'est pourquoi cette thèse a l'objectif d'identifier de façon empirique les déterminants de cette crise ...

We estimate fiscal reaction functions for non-hydrocarbon tax and public spending shares of national income and for debt management strategies adopted by Norway and compare these with rules that would prevail under the permanent income hypothesis and bird-in-hand rule. We conclude that the fiscal reaction functions adopted by Norway have to some extent been forward-looking when it comes to the rising pension bill, but backward-looking when it comes to hydrocarbon revenues. Still, our results suggest that the imminent costs of a rapidly graying population are not sufficiently taken into account in the current fiscal rules, since Norway is on a trajectory of turning a current net asset-GDP-ratio close to one into a net debt-GDP-ratio of two in 2060. Something needs to give in the holy trinity: either the rules of the Stabilization fund have to be tightened, or civil servant salaries, benefits and pensions will no longer have to be fully indexed to market wages, or the retirement age has to be increased.