strategic capacity rationing to induce early purchases dynamic pricing offers the potential to increase revenues at the same time it creates an incentive for customers to strategize over the timing of their purchases a firm should ideally account for this behavior when making its pricing and stocking decisions in particular we investigate whether it is optimal for a firm to create rationing risk by deliberately understocking products then the resulting threat of shortages creates an incentive for customers to purchase early at higher prices but when does such a strategy make sense if it is profitable to create shortages what is the optimal amount of rationing risk to create we develop a stylized model to study this problem in our model customers have heterogeneous valuations for the firm s product and face declining prices over two periods customers are assumed to have identical risk preferences and know the price path and fill rate in each period via its capacity choice the firm is able to control the fill rate and hence the rationing risk faced by customers customers behave strategically and weigh the payoff of immediate purchases against the expected payoff of delaying their purchases we analyze the capacity choice that maximizes the firm s profits first we consider a monopoly market and characterize conditions under which rationing is optimal we examine how the optimal amount of rationing is affected by the magnitude of price changes over time and the degree of risk aversion among customers we then analyze an oligopoly version of the model and show that competition reduces the firms ability to profit from rationing indeed there exists a critical number of firms beyond which a rationing equilibrium cannot be supported

taxes and capital structure understanding firms savings abstract the u s non financial corporate sector became a net lender to the rest of the economy in the early 2000s with close to half of all publicly traded firms holding financial assets in excess of their debt liabilities we develop a simple dynamic model of debt and equity financing where firms strive to accumulate financial assets even though debt is fiscally advantageous relative to equity moreover firms find it optimal to fund additional financial asset holdings through equity revenues the calibrated model matches well the distribution of public firms balance sheets during the 2000s and correctly predicts which firms are net savers

allocating priority with auctions an experimental analysis there are many examples of markets where resources that were allocated ex ante must be rationed ex post two alternative methods of rationing are considered in this paper priority service see chao and wilson american economic review 77 1987 and wilson econometrica 57 1989 and proportional rationing see spulber international economic review 33 1992 an experimental environment is developed in which the two rules are implemented within two well known institutions the english and the uniform price sealed bid auctions under two different information conditions we find that priority service generates more efficient allocations than proportional rationing and the sealed bid auction performs better than the english both mechanisms and rationing rules are more efficient when there is a lack of common information

contagion during the greek sovereign debt crisis abstract we examine the impact of news about greece and news about a greek bailout on bank stock prices in 2010 using data for 48 european banks we identify the twenty days with extreme returns on greek sovereign bonds and categorise the news events during those days into news about greece and news about the prospects of a greek bailout we find that except for greek banks news about greece does not lead to abnormal returns while news about a bailout does even for banks without any exposure to greece or other highly indebted euro countries this finding suggests that markets consider news about the bailout to be a signal of european governments willingness in general to use public funds to combat the financial crisis sovereign bond prices of portugal ireland and spain respond to both news about greece and news about a greek bailout

private fiat money with many suppliers a dynamic rational expectations model of money is used to investigate whether a nash equilibrium of many firms each supplying its own brand name currency will optimally deflate their currencies in friedman s 1969 sense the optimal deflation does arise under an open loop dynamic structure but the equilibrium breaks down under a more realistic feedback control structure

does political reform increase wealth or why the difference between the chicago and virginia schools is really an elasticity question this paper shows that contrary to becker work there is no innate tendency for political competition to reduce the total cost of government wealth transfers simple examples demonstrate how the effects of government policies on total wealth boil down to the elasticities of the marginal support and opposition curves disagreements between the chicago and virginia schools of political economy can be understood as a disagreement about these elasticities the broader implications for this argument in terms of the efficiency of the common law are also discussed

progressive screening long term contracting with a privately known stochastic process we examine a model of long term contracting in which the buyer is privately informed about the stochastic process by which her value for a good evolves in addition the realized values are also private information we characterize a class of environments in which the profit maximizing long term contract offered by a monopolist takes an especially simple structure we derive sufficient conditions on primitives under which the optimal contract consists of a menu of deterministic sequences of static contracts within each sequence higher realized values lead to greater quantity provision however an increasing proportion of buyer types are excluded over time eventually leading to inefficiently early termination of the relationship moreover the menu choices differ by future generosity with more costly up front plans guaranteeing greater quantity provision in the future thus the seller screens process information in the initial period and then progressively screens across realized values so as to reduce the information rents paid in future periods copyright oxford university press

fiscal institutions fiscal policy and sovereign risk premia in emu we investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest rate spreads of eurozone countries deficits significantly increase risk premia measured by relative swap spreads the effect of deficits is significantly lower under emu this effect partly results from neglecting the role of fiscal institutions after controlling for institutional changes fiscal policy remains a significant determinant of risk premia in emu better institutions are connected with lower risk premia furthermore deficits matter less for risk premia in countries with better institutions markets acknowledge that better institutions reduce fiscal difficulties rendering the monitoring of annual developments less important

rent seeking over time the continuity of capture recently in this journal skaggs and wasserkrug 1983 presented a model of bureau monitoring and related it to federal reserve behavior central to their argument was that bureau constituencies may pressure congressmen in maintaining the monitoring status quo if competition is to be expected between self interested parties for the property rights associated with regulation and regulatory commissions then bureau monitoring or lack of it should have value the capture of a commission by others is made more costly when information on a bureau s activities is restricted in general the issues surrounding bureau monitoring bring out the dynamic nature of the capture theory of regulation once captured commissions must remain captured if benefits are to accrue to rent seekers over time empirical support for the capture perspective however only relates personal characteristics of the appointed regulators commissioners to characteristics preferred by the regulated to reveal the dynamic nature of capture one must also account for the continuity of commission membership a captured regulatory body can only remain captured if there is a continuity of desirable characteristics by compiling characteristics of appointed members previous studies have examined the output of the appointment process that resulted from competition for positions on regulatory boards however the lack of synchronization between appointments to federal regulatory commissions and presidential elections suggests that the distribution of influence among self interested groups in the selection process may vary over time thus continuous successful capture is more easily achieved if appointees remain on boards for full terms and if possible land reappointments but the process is complicated further because regulators

the evolution of a free banking system the institutional features of models of unregulated monetary systems have often been arbitrarily and implausibly assumed this paper instead provides realistic grounding for important features by constructing a logical evolutionary account of free banking sophisticated and orderly arrangements are shown to emerge from competition and the pursuit of less costly methods of payment the emergence of standardized commodity money is followed by the development in turn of basic money transfer banking easily transferable bank liubilities and clearinghouses the features of an evolved free banking system differ from those assumed in recent models of competitive payments systems

when and why hyperinflating monetary authorities abandon a currency hyperinflating monetary authorities occasionally abandon the currency with delay to extract remaining seignorage modeling the monetary authority as an exhaustible resource extracting monopolist shows the delay increases with higher remaining seignorage or real interest rates or lower seignorage maximizing rates

fiscal news state budget rules and tax exempt bond yields abstract this paper investigates how state fiscal institutions such as balanced budget rules and restrictions on state debt issuance mediate the bond market reaction to state fiscal news we analyze data on the yields of bonds issued by different states as reported in the chubb relative value survey along with data on state budget forecasts for the period 1988 1998 we find that unexpected deficits are correlated with higher state bond yields this effect is smaller for states with tight antideficit rules than for states without these fiscal rules unexpected deficits have a particularly large effect in raising bond yields of states with tax limits these results suggest that bond market participants view fiscal institutions as relevant in assessing the risk characteristics of tax exempt bonds and that the economic significance of these institutions depends on the state s economic and fiscal circumstances

the price of the euro evidence from sovereign debt markets abstractthe objective of this article is to ascertain how the economic and monetary union emu in europe has affected its members long term government bond yields in order to estimate the effect this article utilizes a synthetic control approach the main finding is that the majority of the member countries did not receive economic gains from the emu in sovereign debt markets synthetic counterfactual analysis finds strong evidence that austria belgium finland france and the netherlands have paid a positive and substantial euro premium in their 10 year government bonds since the adoption of the single currency after the most recent financial crisis government bond yields have been higher in all member countries compared to the situation that would have occurred without the monetary unification this article concludes that from the viewpoint of sovereign borrowing it would be beneficial for a country to maintain its own currency and monetary policy

size matters for liquidity evidence from emu sovereign yield spreads abstract the objective is to study the relative importance of domestic components of emu sovereign yield spreads since the start of monetary integration the results indicate a change in the market value of liquidity as measured by market size after emu

revenue implications of money creation under leviathan most governments possess a monopoly franchise in the creation of money economists provide an analytical justification for this institutional arrangement either in terms of the use of monetary aggregates for macro economic stabilization or in terms of the alleged inability of competitive markets to generate tolerably efficient monetary results any complete case for the government s monetary monopoly must however depend on a comparison of market and political arrangements a comparison that requires predictions about how governments are likely to behave once a monopoly franchise is assigned similarly such predictions are crucial in evaluating restrictions that might be imposed on the government s exercise of its money creation power in designing a monetary constitution in the analysis of political arrangements the revenue implications of the money creation power are probably more significant than considerations of either macro economic stability or optimality in the money supply although those revenue implications are incidental to demonstrating the nature of market failure in monetary arrangements they are fundamental in understanding how the government might exploit a monopoly in money creation once granted our interest in the revenue effects of money creation stems from a broader study of constitutional restrictions on the revenueraising authority of government see our book the power to create money is naturally encompassed in this restrictions on the revenue raising power must embody restrictions on the power to create money consequently the fiscal constitution has important implications for the monetary constitution in this paper we examine both the revenue implications of money creation and desirable consitutional restrictions on the money creation power within the context of a specific model of political processes

selling formats for search goods the paper offers a comparative analysis of different ways to sell products selling formats when buyers incur evaluation costs since these costs are sunk at the moment of trade buyers may refrain from incurring them for fear of later opportunism on the part of sellers it is found that the use of many common selling formats can be explained in terms of their ability to alleviate this problem specifically i explain price advertising seller colocation and bargaining the theory explains much of the divergence in retail trading institutions and leads to several testable predictions

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

shifting mne taxation from national to global profits a radical reform long overdue the current separate accounting taxation of corporations gives governments the right to tax the national incomes of firms operating within their borders however multinational and increasingly digital business models beg the question what is national taxable income we argue that a radical rethink of the corporate taxation moving away from a separate taxation of national corporate income to a taxation of global corporate income allocated via formula apportionment is long overdue global corporate income as a basis for taxation is supported both by recent theoretical developments and corroborating empirical evidence with the eu and emerging economies including china already considering its adoption nor is it new as we relate formula apportionment of global corporate income was used a century ago before commercial and political interests promoted separate accounting thereby providing both precedent and experience to inform its re adoption

spread the news the impact of news on the european sovereign bond markets during the crisis we investigate how news affected domestic interest spreads vis a vis germany and how it propagated to other countries during the recent crisis period thereby distinguishing between the so called giips countries and other european countries we make original use of the eurointelligence newsflash to construct news variables based on the amount of news that is released on a country on a given date we find that more news on average raises the domestic interest spread of giips countries since september 2009 in addition we find that it leads to an increase in the interest spreads of other giips countries the magnitude of this effect is related to cross border bank holdings a split of news into bad and good news shows that the upward pressure on domestic and foreign interest spreads is driven by bad news we also find spillovers of bad news from giips countries onto non giips countries however the magnitude of these spillovers is substantially smaller than that to other giips countries

is the friedman rule optimal when money is an intermediate good in contrast to the recent literature on the optimal inflation tax we show that in models where money reduces transactions costs it is optimal to set the inflation tax to zero when seigniorage is replaced by revenue from distortionary taxes the main reasons for this result are that the variable costs of supplying real balances are negligible and the inflation tax is a unit tax we also show that the intermediate good optimal taxation rules in the public finance literature cannot be directly applied both when money is costless and when it requires resources to be produced

the 2007 nobel memorial prize in mechanism design theory this paper provides an overview of mechanism design theory and explains the roles played by leonid hurwicz eric maskin and roger myerson in the development of this field

robust monopoly pricing we consider a robust version of the classic problem of optimal monopoly pricing with incomplete information in the robust version the seller faces model uncertainty and only knows that the true demand distribution is in the neighborhood of a given model distribution we characterize the pricing policies under two distinct decision criteria with multiple priors i maximin utility and ii minimax regret the equilibrium price under either criterion is lower then in the absence of uncertainty the concern for robustness leads the seller to concede a larger information rent to all buyers with values below the optimal price without uncertainty

priority service pricing investment and market organization tingent forward delivery contracts offered by a seller each customer s selection of one contract from the menu determines the customer s service order or priority in each contingency the seller rations supplies by serving customers in order of their selected priorities until the supply is exhausted or all customers are served various forms of priority service are widely

adaptive learning and the transition to fiat money this article explores some implications of adaptive learning for monetary evolution using a search theoretic framework that allows for media of exchange network effects adaptive learning precludes any voluntary transition to a fiat standard from a non monetary state of nature and can account for the historically observed tendency for fiat monetary standards to emerge only following the prior appearance of commodity money and the widespread employment of redeemable banknotes adaptive learning can also account for governments frequent resort to coercive measures to force a switch to fiat money and for their ability to affect such a switch even when doing so is not pareto optimal exchange media fall into the general category of products for which the utility that a user of the good derives from use of the good increases with the number of other agents using the good katz and shapiro 1985 p 424 there are two reasons for these positive network effects 1 indirect the more agents who employ a particular medium of exchange the more likely it is that prices will be quoted in terms of that medium of exchange i e that the medium of exchange will also serve as the economy s principle medium of account the costs of exchange are less for a medium of exchange that trades at par this indirect external effect is analogous to one encountered in computer hardware the more purchasers of a particular kind of hardware the more likely manufacturers of software are to supply compatible products 2 direct the more persons who use a particular exchange medium the better its quality or performance this direct network effect is analogous to one encountered in communications technologies such as telephones the analogy is especially close for fiat money which is useless to an isolated individual this article examines some ways in which media of exchange network effects influence the evolution of monetary standards and especially their role in determining both when and how a transition may occur from barter or commodity money to fiat money the approach taken here emphasises the role of adaptive learning where agents select exchange strategies that reflect static expectations concerning other agents preferred strategies although the exchange game agents play generally has multiple nash equilibria including one in which all agents accept fiat money adaptive learning precludes a spontaneous transition from barter to a fiat monetary standard even where a fiat standard would be welfare enhancing yet such learning does not rule out the spontaneous evolution of a commodity money standard or the eventual substitution of redeemable banknotes for commodity money readers familiar with the literature on network effects will recognise this

a fiscal theory of government s role in money i introduction economic policy has up to the turn of the century been motivated primarily by fiscal considerations f iscal measures have created and destroyed industries even where this was not their intent and have in this manner contributed directly to the construction and distortion of the edifice of the modern economy schumpeter 1954 7 why do governments play the roles they do in the monetary system in particular why have national governments almost universally taken over the business of issuing coins and paper currency and replaced precious metals with fiat money as the base supporting bankissued money why have they not in developed countries at least also nationalized the production of checking accounts choosing instead to tax and regulate private banks standard answers to these questions refer to market failures natural monopolies externalities or information asymmetries that might render unregulated private production of money inefficient or unstable or infeasible market failure explanations assume that governments shape monetary institutions to serve money holders by providing a more efficient and stable payments system than would exist under laissez faire thus private competition is not allowed in currency issue because markets inherently would fail or historically did fail there and the legal restrictions we see on deposit banking are ones needed to prevent market failures in that industry recent research supplies three reasons for doubting the adequacy of the market failure approach for explaining monetary arrangements first economic historians have found that the actual forms taken by money and banking regulations and the timing of their adoption often have little apparent connection to alleged market failures observed regulations e g reserve requirements that freeze rather than enhance liquidity are ill designed to remedy the suboptimalities that are supposed to have motivated them second monetary historians have found that systems close to laissez faire have by and large been at least as successful as more restricted systems finally monetary theorists have pointed out weaknesses in theoretical arguments for market failure in money 1 if the market failure explanation is doubtful how else can one explain government s role in money charles kindleberger 1994 xi poses the challenge squarely the economist who doubts the market failure approach has to explain why there seems to be a strong revealed preference in history for a sole issuer we propose a fiscal hypothesis governments have come to supply currency and to restrict the private supply of currency and deposits not to remedy market failures but to provide themselves with seigniorage and loans on favorable terms government currency monopolies and bank regulations can thus be understood as part of the tax system the strong revealed preference in history for a sole issuer is fundamentally the preference of fiscal authorities not of consumers 2 economic historians have of course often recognized fiscal motives behind specific monetary arrangements especially those of ancient and medieval autocracies analysts of developing countries today have recognized that policies of financial repression aim at fostering financial institutions and financial instruments from which government can expropriate significant seigniorage fry 1988 14 giovanni and de melo 1993 we go further in arguing that fiscal forces have typically shaped the industrial organization of money production throughout history and across countries and account for its major institutional features even in advanced democracies today such observed legal restrictions as statutory reserve requirements interest rate ceilings foreign exchange controls and monopoly issue of currency impede efficiency but raise revenue a rational dictator model to develop our hypothesis we adopt a method found in the writings of the italian fiscal theorists especially amilcare puviani

the effects of the 2003 dividend tax cut on corporate behavior interpreting the evidence the 2003 dividend tax reform has generated renewed interest in understanding the economic effects of dividend taxation the reform introduced favorable tax treatment of individual dividend income whereby dividends are taxed at a rate of 15 percent instead of facing the regular progressive individual income tax schedule with a top rate of 35 percent several recent studies have used the 2003 tax cut as a natural experiment to learn about the effects of dividend taxation on corporate behavior these studies have obtained divergent empirical results despite using the same underlying data the goal of this paper is to reexamine the evidence using newly available data and reconcile some of the contradictory results in this recent literature we focus on three questions a did the tax cut cause the surge in dividends or were other factors responsible b did the tax cut induce substitution of repurchases for dividends or did total payouts rise and c did the tax cut induce more efficient distribution of investment funds across firms

bibliography of james m buchanan s publications 1949 1986 1 prices income and public policy with c l allen and m r colberg new york mcgraw hill 1954 second edition 1959 2 public principles of public debt homewood richard d irwin 1958 3 the public finances homewood richard d irwin 1960 second edition 1965 translated into spanish as hacienda publica 1968 third edition 1970 translated into japanese 1972 fourth edition with marilyn flowers 1975 fifth edition with marilyn flowers 1980 sixth edition with marilyn flowers 1986 4 fiscal theory and political economy chapel hill university of north carolina press 1960 translated into turkish 1965 translated into japanese 1972 5 the calculus of consent logical foundations of constitutional democracy with gordon tullock ann arbor university of michigan press 1962 paperback edition 1965 translated into japanese 1979 translated into spanish 1980 6 public finance in democratic process chapel hill university of north carolina press 1966 translated into japanese 1971 translated into spanish 1973 7 demand and supply of public goods chicago rand mcnally 1968 translated into italian 1968 translated into japanese 1974 8 cost and choice an inquiry in economic theory chicago markham publishing co october 1969 out of print reprinted by university of chicago press midway reprint 1979 9 academia in anarchy an economic diagnosis with nicos devletoglou basic books 1970 english edition 1971 10 theory of public choice political applications of economics edited with robert tollison university of michigan press 1972 11 lse essays on cost edited with g f thirlby london wiedenfeld and nicholson 1973 12 the limits of liberty between anarchy and leviathan chicago university of chicago press 1975 translated into japanese 1977 translated into italian 1979 translated into german 1984 13 democracy in deficit the political legacy of lord keynes with richard e wagner new york academic press 1978 translated into japanese 1979 translated into korean 1981 14 freedom in constitutional contract perspective of a political economist college station texas a m university press 1978 15 whatshould economistsdo indianapolis indiana liberty press 1979

sovereign bond yield spreads a time varying coefficient approach abstract we study the determinants of sovereign bond yield spreads across 10 emu countries between q1 1999 and q1 2010 we apply a semiparametric time varying coefficient model to identify to what extent an observed change in the yield spread is due to a shift in macroeconomic fundamentals or due to altering risk pricing we find that at the beginning of emu the government debt level and the general investors risk aversion had a significant impact on interest differentials in the subsequent years however financial markets paid less attention to the fiscal position of a country and the safe haven status of germany diminished in importance by the end of 2006 two years before the fall of lehman brothers financial markets began to grant germany safe haven status again one year later when financial turmoil began the market reaction to fiscal loosening increased considerably the altering in risk pricing over time period confirms the need of time varying coefficient models in this context

public accounting fudges towards emu a first empirical survey and some public choice considerations this paper analyses some one off measures and other accounting tricks that eu member states have been using to qualify for emu membership moving from empirical evidence to strategic goals this investigation brings to the fore three crucial issues the weakness of the methodological rules of the european system of accounts used to assess budgetary convergence in line with the maastricht treaty the open ended definition of the required budgetary discipline the shortcomings of the excessive deficit procedure enforced through the stability pact the conclusion urges a return to a strict annual balance requirement for governments current accounts to impede strategic adjustments of budgetary positions that are in fact creative accounting operations

government revenue from money creation with government and private money abstract for a stationary state we show that if the government is as efficient as a competitive banking industry in producing money then the substitution of private for government money does not alter the revenue from money creation or the present value maximizing holding cost of money if households and non banking firms hold both government and private money then maximum present value requires that the reserve ratio maximize the monetary base and that the base nominal interest elasticity equal minus one with perfect foresight zero money balances and zero revenue from money creation is the only time consistent revenue maximizing solution

political risk and dividend policy evidence from international political crises we examine the impact of political risk on firms payout policy using a large international sample across 35 countries over the period from 1990 to 2008 we find that global political crises raise the market perceived uncertainty and cost of external financing using crisis events as a proxy for political risk we document that past dividend payers are more likely to terminate dividends and that non payers are less likely to initiate dividends during periods of high political risk these findings suggest a precautionary incentive of managers in response to political shocks further analysis shows that the effect of political risk on payout policy is stronger for multinational corporations but can be attenuated by country specific institutional settings such as more stable political systems and stronger investor legal protection

fiscal discipline and the budget process the critical economic policy issue for many oecd countries developing countries and transition economies currently is fiscal consolidation and the maintenance of long run fiscal balance two related components underlie this general goal first several countries face the issue of deficit reduction particularly those countries with high debt gdp ratios second it is becoming increasingly apparent that major reforms of the welfare system and specifically of social security systems are critical ingredients of a long lasting fiscal consolidation see alesina and perotti 1995a in the case of monetary policy a constructive discussion has generated a widespread consensus about the benefits of different monetary institutions relatively few economists dispute the benefits of a certain amount of central bank independence even though different commentators and policymakers may disagree on the optimal degree of independence also a contracting approach has highlighted the benefit of inflation targeting and of certain institutional relationships contracts between the executive and the central bank a similar theoretical and empirical discussion on the role of budget procedures and budget institutions is just beginning in this paper we ask the following two questions i do budget procedures matter for the determination of the budget balance and its composition ii are there certain institutional reforms that one should feel comfortable in recommending based on the relatively scarce empirical evidence available we tentatively answer yes to the first question budget procedures matter on the second question we suggest that the two critical areas of reform are first more transparency second a strengthening of the roles of the executive branch vis a vis the legislature and of the treasury minister vis a vis the rest of the executive branch in order to achieve a centralized and top bottom approach to the budget process

selecting a selling institution auctions versus sequential search we consider the seller s choice between sequential search and an auction when selling n homogeneous units of a good in the presence of informational asymmetries discounting and transaction costs our analysis shows that the expected return per unit from sequential selling decreases in n the number of units being sold for the auction with suitable restrictions the expected return per unit increases in n thus sequential search is the preferred institution if n is small whereas the auction is preferred if n is large historical details of the evolution of livestock markets closely fit our theoretical results

money and monetary stability in europe 1300 1914 abstract this paper investigates the determinants of monetary stability in europe from the late medieval era until world war i through this period the anchor for monetary policy was the silver or gold value of the monetary unit states however frequently abandoned this anchor some depreciating their monetary units against silver and gold less than 10 fold and others more than 10 000 fold between 1500 and 1914 to understand the determinants of these differences we compile a new and comprehensive monetary history dataset for all major states in europe and test alternative theories we find strong evidence that political factors and in particular fiscal capacity political regime and warfare explain patterns of monetary stability this finding is robust to addressing endogeneity controlling for the instability induced by the mechanics of the monetary system and accounting for the impacts of new monetary technologies and the advent of fiat standard

debts and deficits with fragmented fiscal policymaking abstract this paper develops a political economic model of fiscal policy one in which government resources are a common property out of which interest groups can finance expenditures on their preferred items this setup has striking macroeconomic implications transfers are higher than a benevolent planner would choose them to be fiscal deficits emerge even when there are no reasons for intertemporal smoothing and in the long run government debt tends to be excessively high peculiar time profiles for transfers can emerge with high net transfers early on giving rise to high taxes later on