Fiscal Policy, Public Debt Stabilzation and Politics: Theory and evidence from the US and UK

Ben Lockwood, Apostolis Philippopoulos (aphil@aueb.gr) and Andy Snell

No 94-06, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: This paper presents a two-party model of fiscal and debt policy which; (i) explicitly models the partisan, stabilisation, and (to some extent) survival motives of politicians; (ii) has predictions that are largely consistent with existing empirical finding about partisan and electoral effects in government expenditure, tax revenue, and debt; (iii) 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 US and UK data.

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Related works:
Working Paper: Fiscal Policy, Public Debt Stabilization and Politics: Theory and Evidence from the US and UK (1994)
Working Paper: Fiscal Policy, Public Debt Stabilization and Politics: Theory and Evidence from the US and UK (1994)
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