Estimating the effects of fiscal policy under the budget constraint

I reconsider the short-term effects of fiscal policy when both government spending and taxes are allowed to respond to the level of public debt. I embed the long-term government budget constraint in a VAR, and apply this common trends model to US quarterly data. The results overturn some widely held beliefs on fiscal policy effects. The main finding is that expansionary fiscal policy has contractionary effects on output and inflation. Ricardian effects may dominate when fiscal expansions are expected to be adjusted by future tax rises or spending cuts. The evidence supports RBC models with distortionary taxation. We can discard some alternative interpretations that are based on monetary policy reactions or supply-side effects.

Fiscal sustainability and fiscal shocks in a dollarized and oil-exporting country: Ecuador

This paper investigates the fiscal sustainability of an emerging, dollarized, oil-exporting country: Ecuador. A cointegrated VAR approach is adopted in testing, first, if the intertemporal budget constraint is satisfied in Ecuador and, second, in identifying the permanent and transitory shocks that affect a fiscal policy characterized by inertia and a heavy dependence on oil revenues. Following confirmation that the debt-GDP ratio does not place the Ecuadorian budget under any pressure, we reformulate the model and identify two forces that push the fiscal system out of equilibrium, namely, economic activity and oil revenues implemented in the government budget. We argue that Ecuador needs to recover control of its monetary policy and to promote the diversification of its economy in order that non-oil tax revenues can replace oil revenues as a pushing force. Finally, we calculate quarterly elasticities of tax revenues with respect to Ecuador’s GDP and that of eight Eurozone countries. We illustrate graphically how the Eurozone countries with low positive or high negative elasticities’ levels suffer debt problems after the crisis. This finding emphasizes the pressing need for Ecuador to strengthen the connection between its tax revenues and output, and also suggests that the convergence of these elasticities in the Eurozone might contribute to the success of an eventually future fiscal union.

Sustainability of EU fiscal policies. A panel test

The fiscal policy rule implicit in the Stability and Growth Pact, has been rationalised as a way to ensure that national fiscal policies remain sustainable within the EU, thereby endorsing the independence of the ECB. We empirically examine the sustainability of European fiscal policies over the period 1970-2001. The intertemporal government budget constraint provides a test based on the cointegration relation between government revenues, expenditures and interest payments. Sustainability is analysed at both the national level and for a European panel. Results show that European fiscal policy has been sustainable overall, yet national experiences differ considerably.

Double implementation in a market for indivisible goods with a price constraint

I consider the problem of assigning agents to objects where each agent must pay the price of the object he gets and prices must sum to a given number. The objective is to select an assignment-price pair that is envy-free with respect to the true preferences. I prove that the proposed mechanism will implement both in Nash and strong Nash the set of envy-free allocations. The distinguishing feature of the mechanism is that it treats the announced preferences as the true ones and selects an envy-free allocation with respect to the announced preferences.

Addressing the net balances problem as a prerequisite for EU budget reform: a proposal

Conflict among member states regarding the distribution of net financial burdens has been allowed to contaminate the entire design of the EU budget with very negative consequences in terms of equity, efficiency and transparency. To get around this problem and pave the way for a substantive budget reform, we propose to decouple distributional negotiations from the rest of the budget process by linking member state net balances in a rigid manner to relative prosperity. This would be achieved through the introduction of a system of compensating horizontal transfers that would take to its logical conclusion the Commission's proposal for a generalized compensation mechanism. We discuss the impact of the proposed scheme on member states? incentives and illustrate its financial implications using revenue and expenditure projections for 2013 that are based on the current Financial Perspectives and Own Resources Decision.

Budget constrained expenditure multipliers

We show that standard expenditure multipliers capture economy-wide effects of new government projects only when financing constraints are not binding. In actual policy making, however, new projects usually need financing. Under liquidity constraints, new projects are subject to two opposite effects: an income effect and a set of spending substitution effects. The former is the traditional, unrestricted, multiplier effect; the latter is the result of expenditure reallocation to upheld effective financing constraints. Unrestricted multipliers will therefore be, as a general rule, upward biased and policy designs based upon them should be reassessed in the light of the countervailing substitution effects.

Comrades or Culprits? Donor Engagement and Budget Transparency in Aid Dependent Countries

Budget transparency has come to be considered a key aspect of governance. Over the past decade, donors have invested increasing resources in strengthening processes through which budget transparency in developing countries can be enhanced. According to the 2008 Open Budget Index (OBI) Report, however, aid dependency and budget transparency appear to be inversely correlated. This article looks at the role of donor agencies in promoting or preventing budget transparency in aid dependent countries. It analyzes data for a sample of 16 aid-dependent countries included in the OBI, to test some preliminary hypotheses and select six countries for which more detailed findings are then presented. All of these countries have implemented reforms aimed at enhancing budget transparency, with substantial donor support. These, however, often had only limited success, partly because they were not well adapted to the local context, and partly because donors put limited emphasis on improving public access to budget information. Donor efforts were also often offset by other characteristics of donor interventions, namely their fragmentation, lack of transparency, and limited use of program aid modalities such as budget support and pooled sector funding.

Differential epipolar constraint in mobile robot egomotion estimation

The estimation of camera egomotion is a well established problem in computer vision. Many approaches have been proposed based on both the discrete and the differential epipolar constraint. The discrete case is mainly used in self-calibrated stereoscopic systems, whereas the differential case deals with a unique moving camera. The article surveys several methods for mobile robot egomotion estimation covering more than 0.5 million samples using synthetic data. Results from real data are also given

Constraint algorithm for k-presymplectic Hamiltonian systems. Application to singular field theories

The k-symplectic formulation of field theories is especially simple, since only tangent and cotangent bundles are needed in its description. Its defining elements show a close relationship with those in the symplectic formulation of mechanics. It will be shown that this relationship also stands in the presymplectic case. In a natural way,one can mimick the presymplectic constraint algorithm to obtain a constraint algorithmthat can be applied to k-presymplectic field theory, and more particularly to the Lagrangian and Hamiltonian formulations offield theories defined by a singular Lagrangian, as well as to the unified Lagrangian-Hamiltonian formalism (Skinner--Rusk formalism) for k-presymplectic field theory. Two examples of application of the algorithm are also analyzed.

Constraint satisfaction techniques under uncertain conditions for fault diagnosis in nonlinear dynamic systems

The speed of fault isolation is crucial for the design and reconfiguration of fault tolerant control (FTC). In this paper the fault isolation problem is stated as a constraint satisfaction problem (CSP) and solved using constraint propagation techniques. The proposed method is based on constraint satisfaction techniques and uncertainty space refining of interval parameters. In comparison with other approaches based on adaptive observers, the major advantage of the presented method is that the isolation speed is fast even taking into account uncertainty in parameters, measurements and model errors and without the monotonicity assumption. In order to illustrate the proposed approach, a case study of a nonlinear dynamic system is presented

Comparison of Work Scheduling Using Constraint Programming or Auctions

Business processes designers take into account the resources that the processes would need, but, due to the variable cost of certain parameters (like energy) or other circumstances, this scheduling must be done when business process enactment. In this report we formalize the energy aware resource cost, including time and usage dependent rates. We also present a constraint programming approach and an auction-based approach to solve the mentioned problem including a comparison of them and a comparison of the proposed algorithms for solving them

Austerity and anarchy: Budget cuts and social unrest in Europe, 1919-2008

Does fiscal consolidation lead to social unrest? Using cross-country evidencefor the period 1919 to 2008, we examine the extent to which societies becomeunstable after budget cuts. The results show a clear correlation between fiscalretrenchment and instability. Expenditure cuts are particularly potent infueling protests; tax rises have only small and insignificant effects. We test ifthe relationship simply reflects economic downturns, using a recently-developedIMF dataset on exogenous expenditure shocks, and conclude that this is not thecase. While autocracies and democracies show broadly similar responses to budgetcuts, countries with more constraints on the executive are less likely to seeunrest after austerity measures. Growing media penetration does not strengthenthe effect of cut-backs on the level of unrest. We also find that austerity episodesthat result in unrest lead to quick reversals of fiscal policy.

Specificity revisited: The role of cross-investments

Previous analysis has shown that traders may opt for specific technologies with nojoint productivity advantage as a way to commit themselves to trading jointly, butonly when long-term contracting is infeasible. This paper proves that speciÞcity canalso be optimal (by relaxing the budget-balance constraint) in settings with long-termcontracting. Traders will opt for specificity when one trader makes a cross-investmentand either (1) this cross-investment has a direct externality on the other trader, (2) bothparties invest, or (3) private information is present. The specificity (e.g. from non-salvageable investments, specific assets and technologies, narrow business strategies,and exclusivity restrictions) is equally effective regardless of which trader's alternativetrade payoff is reduced. Specificity supports long-term contracts in a broad rangeof settings - both with and without renegotiation. The theory also offers a novelperspective on franchising and vertical integration.

Wage curves for Spain evidence from the family budget survey

This study explores the existence of a wage curve for Spain. To quantify this relationship for the Spanish economy, we used individual datafrom the EPF 1990-1991. The results show the presence of a wage curve with an elasticity of -0.13. The availability of very detailed information on wages and unemployment has also shown that less protected labour market groups -young workers, manual workers and building sector workers- have a higher elasticity of wages to local unemployment. These results could be interpreted as a greater facility of firms in these segments to settle wages as a function ofthe unemployment rate