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Optimal mechanisms for the control of fiscal deficits

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  • Grüner, Hans Peter

Abstract

This paper shows that a simple two-stage voting mechanism may implement a constrained optimal state dependent decision about a fiscal deficit. I consider a setup with strategic fiscal deficits JEL Classification: D82, H62

Suggested Citation

  • Grüner, Hans Peter, 2014. "Optimal mechanisms for the control of fiscal deficits," Working Paper Series 1708, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20141708
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1708.pdf
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    References listed on IDEAS

    as
    1. Marco Battaglini & Stephen Coate, 2008. "A Dynamic Theory of Public Spending, Taxation, and Debt," American Economic Review, American Economic Association, vol. 98(1), pages 201-236, March.
    2. Grüner, Hans Peter & Engelmann, Dirk, 2013. "Tailored Bayesian Mechanisms: Experimental Evidence from Two-Stage Voting Games," CEPR Discussion Papers 9544, C.E.P.R. Discussion Papers.
    3. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    4. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-1188, December.
    5. Gersbach, Hans & Grimm, Oliver & Becker, Johannes Gerd, 2010. "Debt-sensitive Majority Rules," CEPR Discussion Papers 7860, C.E.P.R. Discussion Papers.
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    More about this item

    Keywords

    constitutional choice; fiscal policy rules; mechanism design;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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