Emerging from Crisis: the Mediterranean Neighborhood

So far, developing countries like the countries of the Mediterranean region seem to have been far less affected by the and started to recover earlier crisis than industrial countries. However, the region faces several problems like high unemployment and high inflation in the long term due to higher government consumption.Mediterranean countries, economic crisis, economic recovery

Adam Smith on public expenditure and taxation

This paper presents Adam Smith’s view on taxation and public expenditure, by means of an almost literal reading of the Wealth of Nations famous passages on the "duties of the sovereign" and on the "maxims of taxation". Contrarily to the commonest usage of these passages, we will show that their core is the preoccupation with the public expenditure soaring and the defence of decentralisation. Furthermore and also contrarily to the existing interpretations we defend the non-existence of any contradiction between Smith’s income and price theory (and the incidence hypothesis), provided due attention is paid to the guiding role of the "maxims".Adam Smith, taxation, public expenditure

Empirical Evidence on the Behavior and Stabilizing Role of Fiscal and Monetary Policies in the US

In this paper, standard SVAR tools and counterfactual simulation techniques are applied to study the behavior and countercyclical role of monetary and fiscal policies in the US. In order to set up the model properly, different issues raised by joint identification of monetary and fiscal policy shocks are addressed, in particular, the contemporaneous response of taxes to the federal funds rate. I conclude that the federal funds rate and taxes net of transfers have moved mostly for endogenous reasons and, in the latter case, this reflects automatic rather than discretionary policy. In contrast, government expenditure has been basically driven by exogenous forces. Further, I reach evidence that (automatic) fiscal policy has been the most important stabilizing force in the course of postwar recessions, surpassing the role of monetary policy, while both policies have contributed similarly to narrowing the output gap at early stages of the recovery.