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Being and Consciousness: Fiscal Attitudes according to HANK

Author

Listed:
  • Christian Bayer

    (University of Bonn, CEPR, CESifo, & IZA)

  • Alexander Kriwoluzky

    (Freie Universität Berlin & DIW Berlin)

  • Gernot J. Müller

    (University of Tübingen, CEPR, & CESifo)

  • Fabian Seyrich

    (Frankfurt School of Finance & Management & DIW Berlin)

Abstract

Attitudes toward fiscal policy differ: "fiscal conservatism" and "fiscal liberalism" vary in their willingness to tolerate budget deficits. We challenge the view that such attitudes reflect national preferences. Instead, we offer an economic explanation based on a two-country Heterogeneous Agent New Keynesian model, bringing its implicit political economy dimension to the forefront. We compute the welfare implications of alternative fiscal policies at the household level to assess the conditions under which a policy commands majority support. Whether the majority supports fiscal conservatism or liberalism depends on a country’s debt level, its wealth distribution, and the nature of the economic shock.

Suggested Citation

  • Christian Bayer & Alexander Kriwoluzky & Gernot J. Müller & Fabian Seyrich, 2025. "Being and Consciousness: Fiscal Attitudes according to HANK," ECONtribute Discussion Papers Series 368, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:368
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    File URL: https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_368_2025.pdf
    File Function: First version, 2025
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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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