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I. INTRODUCTION Recessions create fiscal stress for local governments, because their two most important revenue sources--the property tax base and intergovernmental transfers--both tend to fall during a recession. The tax [...], Little is known about how cities and counties respond to negative shocks in their fiscal resources, such as those that occurred after the Great Recession. We provide evidence from the state of Florida on the millage rate and expenditure adjustments that cities and counties make in response to a loss in their two most important fiscal resources--the property tax base and intergovernmental transfers. These adjustments are hypothesized to vary with the monopoly power possessed by the local government. Our findings support this hypothesis and indicate that fiscal stress results in higher millage rates and cuts in expenditures. The cuts are targeted toward capital expenditures and less essential public services. Keywords: housing market crash, Great Recession, millage rates, current and capital expenditures JEL Code: H72

I. INTRODUCTION The Fiscal Stability Treaty, signed on March 2012 and entered into force on January 2013. is a consequence of the 2010 European sovereign debt crisis. This formal agreement [...]

I. INTRODUCTION The U.S. system of unemployment compensation (UC) (1) underwent many important changes during the Great Recession. Most were intended to reduce the economic burden created by the long [...], The extreme labor market weakness during and after the Great Recession led to the passage of extensive federal legislation related to unemployment compensation. In this paper, we summarize that legislation and some of the research related to it. Although our particular focus is on the very long potential durations of benefits (up to 99 weeks) initially implemented in 2008-2009, we also look at a variety of other initiatives. Most of the research we review comes from the United States. But we also provide a brief look at the vast European literature that addresses many of the same policy issues. Keywords: unemployment compensation, unemployment insurance, Great Recession, federal policy JEL Codes: J64, J65, J68

I. INTRODUCTION Slowdowns in economic activity create periods of severe fiscal stress for subnational governments due to the existence of balanced budget rules, borrowing limitations, and limited revenue-raising options (Poterba, [...], Rainy day funds are one of the primary tools that state and local policymakers employ to dampen the effects of downturns. However, since state business cycles are not perfectly synchronized, theoretically there should be risk-sharing benefits to governments who pool their fiscal resources over the business cycle. In this paper, we explore the issues associated with local government risk-sharing and provide estimates of the potential benefits to state governments. Our results suggest that a national rainy day fund would provide considerable fiscal benefits to state governments at a lower price than self-insuring through their own rainy day funds. Keywords: rainy day funds, fiscal institutions, risk sharing JEL Codes: H2, H3, H7

This article provides an analysis of the quasi-decentralized budgeting process used in Vietnam as defined in the 2002 Law on the State Budget. Although the Government is controlled by a single political party and relies on a single state budget, the Law grants provinces considerable decentralized power over allocation of tax revenues and expenditure responsibilities within their own jurisdictions. The article documents the effects of various aspects of the Law on the revenues and spending of sub-national governments in the country and illustrates how various provinces have responded to the decentralized powers granted under the Law.

The fundamental questions addressed in this article are the following: what is the most appropriate approach to organizing the vertical structure of tax administration, and what are the determinant factors that may make an approach more or less optimal in any particular country? Both centralized and multi-level tax administration have certain advantages and disadvantages. However, given the general approach to fiscal decentralization in a country and, more in particular, assignment of taxes and other revenue sources to different levels of government, it is possible to identify better and worse approaches to organizing tax administration.

This research attempts to apply U.S.-based measures in order to examine municipal fiscal conditions in Thailand. Fourteen municipal governments located in the central and eastern regions of the country are explored, utilizing data from FY 2001 to 2006. The findings show that the selected measures of revenue-raising capacity and expenditure provide a sensible picture of Thai municipal fiscal conditions when compared to U.S. cities during past decades. Large, highly populous central cities as well as semi-rural, residential areas are fiscally weak. By contrast, suburban and industry-based cities are fiscally healthy. This study provides a foundation for the design of intergovernmental transfer systems that takes into account the local fiscal conditions and helps to extend the external validity of existing analytical tools.

For decades, state funding of public historically black colleges and universities (HBCU) has been shown to be de facto discriminatory relative to the funding of their predominately white counterparts. Although [...]

The fiscal capacity of a school district measures the difference between a district's ability to raise revenues locally and the expenditures needed to provide some specified level of educational services. [...]

The 2001 recession had a major effect on Georgia's fiscal condition. We explore how economic conditions affected state and local financing of K- 12 education in Georgia. We find that [...]

A simple analytical exposition of the model used by W. Godley and M. Lavoie is presented to argue a case for fiscal stabilization policy. It is concluded that a government debt rule is required to avoid instabilities arising from the accumulation of debt interest payments, if monetary policy is to be actively pursued.

The influence of trade liberalization on economic growth is investigated by comparing the economic growth of liberalizing countries with those who do not. Results indicate that trade liberalization has no effects on economic growth.

A stock-flow consistent (SFC) model is presented in order to examine contentions regarding monetary and fiscal policy. It is concluded that explosive interest flows will not be generated by an economy that has a real rate of interest net of taxes that exceeds the real growth rate.

This paper analyses the fiscal pressure from population ageing using an intertemporal CGE model, applied to Australia, and compares the results with those of a recent government-commissioned study. The latter study uses an alternative modelling approach based on extrapolation rather than optimising behaviour of consumers and firms. The deadweight losses from the fiscal pressure caused by population ageing are equivalent to an annual loss of consumption of $260 per person per year in 2003 dollars in the balanced-budget scenario. A feasible degree of tax smoothing would reduce this welfare loss by an equivalent of $70 per person per year. Unlike the extrapolation-based model, the CGE approach takes account of feedback effects of ageing-induced tax increases on consumption and labour supply, which in turn impact on the ultimate magnitude of fiscal pressure and therefore tax increases. However, a counterfactual simulation suggests that the difference in terms of deadweight losses between the two modelling approaches is modest, at about $30 per person per year.

A study on examining firstly, the impact on work effort of changes in government purchases financed with lump-sum taxes, in a neo-classical framework with respect to four industrialized countries and secondly, the expenditure-work effort relationship in a broader conceptual context that allows for distortionary taxation and a disaggregation of the income and substitution effects is presented.

An empirical study on the ecological fiscal reform introduced in Switzerland, which encourages employment and at the same time dissuades from excessive use of energy and thereby decreases energy-induced external costs is presented. The general population rejected the fiscal reform. The analysis of the study is done using SCREEN, a general equilibrium model.

Governments determine the size of the unit of value just as they determine the length and weight of physical units of measure. What are the different ways that a government can control the size of the unit of value, that is, control the price level? In general, the government designates a resource--gold, paper currency, another country's currency--and defines its unit of value as a particular amount of that resource. An interesting variant, proposed by Irving Fisher in 1913 and implemented more recently in Chile, is to alter the resource content of the unit to stabilize the price level. Another idea is to alter the interest rate paid on reserves in a way that stabilizes the price level. This essay originally appeared as 'Controlling the Price Level,' Contributions to Macroeconomics 2(1), Article 5. See http://www.bepress.com/bejm/contributions/vol2/iss1/art5. Reprinted with kind permission of the Berkeley Electronic Press.

A comparative study is done between two alternate regimes of carrying out fiscal policy over the business cycle. The first regime, suggested by Ramsey which completely smooth the taxes, is preferred in long run than the second regime by Gramm-Rudman-Hollings GRH in which debt accumulation is financed by tax hikes in future which is good only in short term.

We introduce public capital and public services as inputs in an endogenous growth model. We show that the growth rate depends on the apportionment of tax revenues between the accumulation of public capital and the provision of public services. When public spending is financed by proportional income taxes, the growth rate, the level of public spending as a proportion of GDP, the level of investment in public capital as a proportion of total public spending, and the level of private investment as a proportion of total private spending all are lower in the equilibrium outcome than in the optimal outcome. JEL classification: E62, O40 Politique fiscale, croissance a long terme et bien-etre dans un modele stock/flow de biens publics. Les auteurs introduisent du capital public et des services publics comme intrants dans un modele de croissance endogene. On montre que le taux de croissance depend de l'allocation des revenus de la fiscalite entre l'accumulation de capital public et la fourniture de services publics. Quand les depenses publiques sont financees par un impot proportionnel sur le revenu, le taux de croissance, le niveau de depenses publiques en poureentage du PIB, le niveau d'investissement en capital public, et le niveau d'investissement prive en proportion de la depense totale privee sont tous moins eleves au niveau d'equilibre que ce qui serait le resultat optimal

This article examines whether greater fragmentation in local government improves efficiency. Tiebout (1956) 'exiting' is the general theoretical underpinning for the belief that fragmentation should improve efficiency. The article argues that previous evidence for the greater efficiency of fragmented government is weak because the complex nature of many local government systems is not consistent with the institutional structures supposed in the models and does not allow for simple testing. Using evidence from England where institutional structures more closely resemble those in the Tiebout model, efficiency is analyzed both at the jurisdictional and metropolitan level in a straightforward manner. No evidence for the supposed positive effects of fragmentation is found. Voice mechanisms may explain why fiscal mobility does not lead to efficiency in the fragmented system of metropolitan England.

Optimal monetary policy maximizes the welfare of a representative agent, given frictions in the economic environment. Constructing a model with two sets of frictions--costly price adjustment by imperfectly competitive firms and costly exchange of wealth for goods--we find optimal monetary policy is governed by two familiar principles. First, the average level of the nominal interest rate should be sufficiently low, as suggested by Milton Friedman, that there should be deflation on average. Yet, the Keynesian frictions imply that the optimal nominal interest rate is positive. Second, as various shocks occur to the real and monetary sectors, the price level should be largely stabilized, as suggested by Irving Fisher, albeit around a deflationary trend path. Since expected inflation is roughly constant through time, the nominal interest rate must therefore vary with the Fisherian determinants of the real interest rate. Although the monetary authority has substantial leverage over real activity in our model economy, it chooses real allocations that closely resemble those which would occur if prices were flexible. In our benchmark model, there is some tendency for the monetary authority to smooth nominal and real interest rates.

Monetary policy analyses usually assume an atomistic private sector, thereby ignoring potential interactions between policy and wage-setting decisions. Yet, non-atomistic wage setters are a key feature of several industrialized economies. We study the economic consequence of non-atomistic agents and show that this qualifies previous results on the effects and desirability of a conservative central banker. In particular, the central bank aversion to inflation may have a permanent effect on structural employment, while no such effect emerges with atomistic agents.

A fundamentals based monetary policy role, which would be the optimal monetary policy without commitment when private agents have perfectly rational expectations, is unstable if in fact these agents follow standard adaptive learning roles. This problem can be overcome if private expectations are observed and suitably incorporated into the policy maker's optimal rule. These strong results extend to the case in which there is simultaneous learning by the policy maker and the private agents. Our findings show the importance of conditioning policy appropriately, not just on fundamentals, but also directly on observed household and firm expectations.

In this paper, we derive principles of optimal cyclical monetary policy in an economy without capital, with a cash-in-advance restriction on household transactions, and monopolistic firms that set prices one period in advance. The only distortionary policy instruments are the nominal interest rate and the money supply. In this environment it is feasible to undo both the cash-in-advance and price setting restrictions, but not the distortion due to monopolistic competition. We show that it is optimal to follow the Friedman role, and thus offset the cash-in-advance restriction. We also find that, in general, it is not optimal to undo the price setting restriction, so that a simple criterion of eliminating gaps is not optimal. Sticky prices provide the planner with tools to improve upon a distorted flexible price allocation.

We study the optimal monetary policy in a two-country open-economy model under two monetary arrangements: (a) multiple currencies controlled by independent policy makers; (b) common currencies with a centralized policy maker. Our findings suggest that: (i) monetary policy competition leads to higher long-term inflation and interest rates with large welfare losses; (ii) the inflation bias and the consequent losses are larger when countries are unable to commit to future policies; (iii) the welfare losses from higher long-term inflation dominates the welfare costs of losing the ability to react optimally to shocks.

This paper develops a welfare-based model of monetary policy in an open economy. We examine the optimal monetary policy under commitment, focusing on the nature of price adjustment in determining policy. We investigate the implications of these policies for exchange-rate flexibility. The traditional approach maintains that exchange-rate flexibility is desirable in the presence of real country-specific shocks that require adjustment in relative prices. However, in the light of empirical evidence on nominal price response to exchange-rate changes--specifically, that there appears to be a large degree of local-currency pricing (LCP) in industrialized countries--the expenditure-switching role played by nominal exchange rates may be exaggerated in the traditional literature. In the presence of LCP, we find that the optimal monetary policy leads to a fixed exchange rate, even in the presence of country-specific shocks. This is true whether monetary policy is chosen cooperatively or non-cooperatively among countries.

Why is inflation persistently high in some periods and low in others? The reason may be the absence of commitment in monetary policy. In a standard model, absence of commitment leads to multiple equilibria, or expectation traps, even without trigger strategies. In these traps, expectations of high or low inflation lead the public to take defensive actions, which then make accommodating those expectations the optimal monetary policy. Under commitment, the equilibrium is unique and the inflation rate is low on average. This analysis suggests that institutions which promote commitment can prevent high inflation episodes from recurring.

This paper develops and estimates a game-theoretical model of inflation targeting where the central banker's preferences are asymmetric around the targeted rate. Specifically, positive deviations from the target can be weighted more, or less, severely than negative ones in the central banker's loss function. It is shown that some of the previous results derived under the assumption of symmetry are not robust to this generalization of preferences. Estimates of the central banker's preference parameters for Canada, Sweden, and the UK are statistically different from the one implied by the commonly used quadratic loss function., THIS PAPER DEVELOPS and estimates a game-theoretical model of monetary policy where the central banker's preferences are asymmetric around the targeted inflation rate. The preference specification permits different weights for [...]

We examine the relationship between central bank transparency and the costs of disinflation. We provide a model where disinflation efforts imply a higher sacrifice ratio when the public is not fully convinced about the central bank's resolve to reduce inflation and show that information dissemination by the central bank can remedy this problem. To assess the empirical implications we estimate sacrifice ratios based on individual estimates of Phillips curves in 21 OECD economies. Using transparency indices pertaining to both the detail with which central banks publish forecasts and the means by which policy decisions are explained, we find that a higher degree of central bank transparency is associated with lower sacrifice ratios. This result is robust to alternative estimation methods and periods considered.

Most economists argue that transparency in monetary policy is desirable because it helps the private sector make better informed decisions. They also argue that a lack of transparency has been a key problem in Europe's monetary policy. Using standard models--where there are also opportunities to use fiscal policy--we show that a lack of transparency will have very different effects depending on whether it represents a lack of political transparency or a lack of economic (or information) transparency. The former allows the central bank to create and exploit a 'strategic' reputation to its own advantage. The latter does not. Thus, political transparency helps us understand how monetary policy decisions are made. But economic transparency would reveal what information went into those decisions.

This paper puts the issue of monetary policy transparency into a broad economic perspective. In so doing, it narrows the focus from that which frequently appears in this literature. The analysis is predicated on the assertion that the sole economic argument for transparency is policy effectiveness--transparency is desirable if it enhances the effectiveness of policy and is not if it does not. In cases where transparency neither enhances nor impairs the effectiveness of policy, the case for transparency can be argued on non-economic grounds. This analysis has implications for several policy/transparency issues. Important among these is the assumption in this literature that inflation and output must be viewed by policymakers as substitutes. I suggest that policymakers might generate a better inflation/output outcome if they thought of inflation and output objectives as complements rather than substitutes.