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This paper offers a formal analysis of the relationship between changes in government primary balance and debt-to-GDP ratio. it establishes the conditions under which a fiscal consolidation increases - instead of decreasing - the stock of government liabilities relative to aggregate output. A crucial role is played by the relationship between the elasticities of average cost of debt and nominal output to primary balance: while the former depends on debt maturity and risk premia dynamics, the latter relates to the well-known controversy on the size of government spending multipliers. The paper shows an application to the ongoing fiscal consolidation process in the Eurozone.

This paper offers a formal analysis of the relationship between changes in government primary balance and debt-to-GDP ratio. it establishes the conditions under which a fiscal consolidation increases - instead of decreasing - the stock of government liabilities relative to aggregate output. A crucial role is played by the relationship between the elasticities of average cost of debt and nominal output to primary balance: while the former depends on debt maturity and risk premia dynamics, the latter relates to the well-known controversy on the size of government spending multipliers. The paper shows an application to the ongoing fiscal consolidation process in the Eurozone.

In this paper we set up a NK-DSGE model in which the consumer derives utility from a consumption basket made of public and private consumption, there is monopolistic competiton in the intermediate good sector, Calvo-Yun price setting, endogenous labour supply and Taylor rule for monetary policy. We analyse the effects of a counterciclical fiscal policy rule and how varying the degree of counterciclicality affects the determinacy of the rational expectations equilbrium and the ability to respond to technological and government spending shocks. A broad conclusion is that desiderability of pro/counter ciclical stance of fiscal policy cannot accurately be drawn without taking into account the quality of the public expenditure and the way it interacts with private consumption.

In this paper we set up a NK-DSGE model in which the consumer derives utility from a consumption basket made of public and private consumption, there is monopolistic competiton in the intermediate good sector, Calvo-Yun price setting, endogenous labour supply and Taylor rule for monetary policy. We analyse the effects of a counterciclical fiscal policy rule and how varying the degree of counterciclicality affects the determinacy of the rational expectations equilbrium and the ability to respond to technological and government spending shocks. A broad conclusion is that desiderability of pro/counter ciclical stance of fiscal policy cannot accurately be drawn without taking into account the quality of the public expenditure and the way it interacts with private consumption.

This paper develops a three periods OLG growth model where agents accumulate human capital in the first period (benefiting from grandfathers savings, public expenditure in education, and human capital level of their parents), work and save in the second period (earning a salary proportional to the human capital level accumulated), and retire in the thid period, leaving bequest on for the young generation. Government raises taxes on labour and capital in order to finance public expenditure in education. We derive conditions for equilibrium and for the rate of growth, and then carry out welfare analysis in order to determine optimal taxation in a Nash policy setting.

This paper develops a three periods OLG growth model where agents accumulate human capital in the first period (benefiting from grandfathers savings, public expenditure in education, and human capital level of their parents), work and save in the second period (earning a salary proportional to the human capital level accumulated), and retire in the thid period, leaving bequest on for the young generation. Government raises taxes on labour and capital in order to finance public expenditure in education. We derive conditions for equilibrium and for the rate of growth, and then carry out welfare analysis in order to determine optimal taxation in a Nash policy setting.

We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information on member states' potential output and (ii) bail-out among member states. The first-best deficit is contingent on the cycle, that is, on member states' output gap. In the presence of asymmetric information and bailout, the first-best deficit is not implementable. Bail-out lowers the scope for signalling (discrimination) by member states (lenders) and induces overborrowing by member states characterized by a low output gap. The Monetary Union can design a mechanism such that a member state with a smaller negative output gap runs an optimal budget deficit upon receiving a transfer form the Union. We show that, this 'cyclically-contingent' fiscal framework Pareto dominates the 'cyclically-adjusted' fiscal rule currently enforced by the European Monetary Union. Our model can then account for a situation where both asymmetric information over cyclical positions and the presence of bail-out among member states does not induce borrowing distortions.

We revisit the discussion about the relationship between price's cyclical features, implicit collusion and the demand level in an oligopoly supergame where a positive shock may hit demand and disrupt collusion. The novel feature of our model consists in characterising the post-shock noncooperative price and comparing it against the cartel price played in the last period of the collusive path, to single out the conditions for procyclicality to arise both in the short and in the long-run.

We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information about member states' potential output and, therefore, output gap and (ii) bail-out among member states. In our framework, bail-out lowers the scope for signalling (discrimination) by member states (lenders). In the presence of asymmetric information, bail-out and national governments' shortsightedness make the first-best fiscal rule non-implementable as member states are tempted to run excessively high deficits. The Monetary Union designs a mechanism such that member states with high output gap (i.e., in a recession) run higher budget deficits by making an ex-post transfer to the Union. We find that the first-best deficit is contingent on the cycle – i.e., on the member state's output gap – and, all else equal, can be implemented provided the member states' ability to repay its own debt upon the realization of a bad shock is sufficiently high. A downward distortion in the deficit run by a member state during an expansion is otherwise introduced. Finally, the Monetary Union cannot discriminate among types of borrowers when national governments are excessively shortsighted.

We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information about member states' potential output and, therefore, output gap and (ii) bail-out among member states. In our framework, bail-out lowers the scope for signalling (discrimination) by member states (lenders). In the presence of asymmetric information, bail-out and national governments' shortsightedness make the first-best fiscal rule non-implementable as member states are tempted to run excessively high deficits. The Monetary Union designs a mechanism such that member states with high output gap (i.e., in a recession) run higher budget deficits by making an ex-post transfer to the Union. We find that the first-best deficit is contingent on the cycle – i.e., on the member state's output gap – and, all else equal, can be implemented provided the member states' ability to repay its own debt upon the realization of a bad shock is sufficiently high. A downward distortion in the deficit run by a member state during an expansion is otherwise introduced. Finally, the Monetary Union cannot discriminate among types of borrowers when national governments are excessively shortsighted.