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Being and Consciousness: Fiscal Attitudes according to HANK

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  • Bayer, Christian
  • Kriwoluzky, Alexander
  • Müller, Gernot
  • Seyrich, Fabian

Abstract

Cross-country differences in fiscal attitudes need not reflect deep-rooted national preferences. We show this by bringing the latent political-economy dimension of HANK models to the fore and applying it to a central monetary-union issue: the national fiscal stance. Comparing household-level welfare under alternative budgetary policies reveals variation in ``fiscal preferences'' within countries and distinct voting majorities across countries. These majorities depend on initial public debt and the underlying shock: following a monetary tightening, the majority supports a balanced-budget policy when debt is low but deficit financing when debt is high. Following a government-spending increase, even low-debt countries support deficit financing.

Suggested Citation

  • Bayer, Christian & Kriwoluzky, Alexander & Müller, Gernot & Seyrich, Fabian, 2025. "Being and Consciousness: Fiscal Attitudes according to HANK," CEPR Discussion Papers 20473, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:20473
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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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