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What are fiscal policy rules? What are the principal benefits and drawbacks associated with various fiscal rules, particularly compared with alternative approaches to fiscal adjustment? Can fiscal rules contribute to long-run sustainability and welfare without sacrificing short-run stabilization? If so, what characteristics of fiscal rules make this contribution most effective? And in what circumstances and contexts, if any should the IMF encourage its member countries to adopt fiscal rules? This paper seeks to identify sensible fiscal policy rules that can succeed, if chosen by a member country, as an alternative to descretionary fiscal rules

This paper investigates the macroeconomic implications of alternative tax regimes. For this purpose, a one-sector general equilibrium model is constructed in which heterogeneous agents differ in productivity and holdings of capital in the sense of incurring transaction costs for participating in the capital market. A Cobb-Douglas production function is employed that can capture the capital-skill complementarity effect and the difference in productivities of the skilled and unskilled workers. With regards to fiscal policy experiments, this paper examines tax structures where a permanent reduction in each of the three main tax instruments namely, consumption, labour and capital income tax is compensated by a permanent increase in one of the remaining two policy instruments such that the government budget constraint is tax revenue neutral. The government levies taxes on consumption, labour income and capital income in order to finance its only activity, government consumption. Next, the model economy is calibrated to the Greek economy to reflect the great ratios over 1960:1-2005:4 and then, it studies the long-run, welfare and transitional effects of the undertaken analysis. The sensitivity analysis shows that the quantitative and qualitative findings are quite robust.

Macroeconomists often prefer monetary policy to fiscal policy as a tool to stabilize business cycles. Fiscal policy is typically only effective with a lag, and results in permanent deficits with higher nominal interest rates and distortionary taxes. In addition, a high marginal propensity to save out of temporary tax cuts might result in low fiscal multipliers with empirical estimates often below 1 (see Ramey (2011b) and Barro and Redlick (2011)). The zero lower bound on nominal interest rates, however, constrains the effectiveness of monetary policy during liquidity traps. Large stocks of sovereign debt limit the scope of fiscal stimulus, and inflated central bank balance sheets constrain asset-purchase programs as forms of unconventional monetary policy. The unclear effectiveness of several measures of monetary policy - both conventional and unconventional - after the 2008-2009 Financial Crisis calls for alternative mechanisms to increase aggregate demand and hence promote growth. This issue is especially relevant for several major developed economies that, years after the end of the Great Recession in the United States, are still experiencing sluggish growth. In particular, southern European countries are still facing the contractionary effects of the austerity measures they implemented to abate their debt-to-GDP ratios during the Euro sovereign-debt crisis. Many economists argue structural reforms are necessary to improve the competitiveness of these countries in the long run, but promoting a short-run increase in aggregate demand to jump start the economy is also a compelling objective for policy makers. The conundrum the Euro area has faced since the start of the Great Recession is to generate inflation and ultimately stimulate consumption and economic growth in a setting in which traditional monetary policy measures were not viable and governments could not generate growth with fiscal stimulus because of their large debt-to-GDP ratios. This challenge was so compelling that in his Marjolin lecture on February 4, 2016, the president of the European Central Bank, Mario Draghi, asserted that "there are forces in the global economy that are conspiring to hold inflation down." (Draghi, 2016).

This article examines some of the policies and assumptions behind the government's fiscal policies and family support.The responsibility for dependent children has become lost in a 'no mans land' somewhere between the wages system, the government, and the family itself.Of particular concern is the erosion of the real value of income, allowance and other support (eg. child care, refuges etc.) for poor families. Alongside the government's oft quoted concern for the needy has been the actual fall in wellbeing of those most in need (eg. single parents, the unemployed, low income families) while other more traditional family notions have been supported (eg. dependent spouse rebate). In some instances this redistribution has occurred through active policies (eg. family allowances) while in other cases they have come about by 'non policies' (eg. failure to index allowances for single parents).

Defence date: 26 March 2007 ; Examining board: Prof. Giancarlo Corsetti, EUI, Supervisor ; Prof. Morten Ravn, EUI ; Dr. Jeffrey Campbell, Federal Reserve Bank of Chicago ; Prof. Roel Beetsma, University of Amsterdam ; There is little doubt that fiscal policy plays an important role in business cycle fluctuations; however, the ability of fiscal policy measure to work as a countercyclical stimulus has recently been questioned (see Taylor, 2000), in light of the efficiency and transparency of monetary policy interventions. Far from postulating a definitive answer to the debate, the objective of this dissertation is to contribute to a better understanding of the transmission mechanism of fiscal policy shocks, through their interaction with the consumption behaviour of private agents. The fundamental contribution of this thesis is the introduction of different forms of households' heterogeneity in the analysis of the effects of government expenditure shocks and tax cuts.

Click on image to enlarge. This chart is from the Committee for a Responsible Federal Budget. The figures are totals between 2021 and 2031.