Fiscal Policy, Public Debt Stabilisation and Politics

Andrew Snell, Ben Lockwood, Apostolis Philippopoulos

Research output: Contribution to journalArticlepeer-review

Abstract

This paper presents a two-party model of fiscal and debt policy in which the parties do not care about policy outcomes when out of office. Unlike other models of this type, our model has predictions that are largely consistent with existing empirical findings about partisan and electoral effects on government expenditure, tax revenue, and debt. It also yields new predictions about how the feedback of fiscal policy on lagged debt may depend on partisan and electoral effects. These new predictions are not rejected by a test of the model on UK data.
Original languageEnglish
Pages (from-to)894-911
Number of pages18
JournalThe Economic Journal
Volume106
Issue number437
Publication statusPublished - Jul 1996

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