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