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Federal fiscal constitutions part 1: risk sharing and moral hazard
Inspired by the current European developments, we study equilibrium fiscal policy under alternative constitutional arrangements in a federation of countries. There are two levels of government: local and federal. Local policy redistributes across individuals and affects the probability of aggregate shocks, while federal policy shares international risk. Policies are chosen under majority rule. There is a moral hazard problem: federal risk-sharing can induce the local governments to enact policies that increase local risk. We investigate this incentive problem under alternative fiscal ...
The optimality of nominal contracts
Monetary regimes and fiscal deficits: a comparative analysis
Money, deficit and public debt: an empirical investigation