The political economy of fiscal policy. Public deficits, volatility, and growth. (Q818316)

This monograph presents new theoretical and empirical studies on fiscal and macroeconomic issues. After the introduction the author presents a model of endogenous fiscal policy in a simple growth framework. In the next chapter, he extends the framework that is developed in chapter 2 to study the inflationary consequence of the fiscal policy set by polarized policymakers by introducing money and inflation tax into the economy. Chapter 4 is motivated by an important puzzle arising from the contrasting macroeconomic experience across developing regions, that is, in sharp contrast to East Asia, much of Latin America and sub-Saharan Africa has often engaged in unsustainable fiscal policies, leading to huge fiscal deficit, external debt crises, or hyperinflation. In chapter 5 the author provides a comprehensive empirical test on a large pool of potential explanatory variables of public deficits in a panel of 57 countries including OECD countries and derives robust conclusions about which of these variables (or which theories) are important in explaining cross-country variation in fiscal balance. Finally, he empirically investigates the fiscal instability channel that negatively links income inequality to growth in chapter 6.