“Labor Market Integration and Fiscal Competition” with Pawel Kopiec (2022) - Journal of Money, Credit and Banking (available upon request)
Abstract: This paper studies the long-run impact of international labor mobility on a union of countries with an integrated labor market. We build a multi-country model populated by overlapping generations of households with endogenous cross-country migration flows. Independent governments internalize the impact of their policies on worker migration decisions and use fiscal measures to compete for labor. The model is calibrated to match the empirical economic and migration patterns in the European Union. We find that the fiscal competition motive has a quantitatively significant impact on fiscal policy decreasing the average debt-to-GDP ratio by 12 percentage points and the average labor income tax by 1 percentage point relative to the no-competition scenario.
“Optimal Time-Consistent Government Debt Maturity, Fiscal Policy, and Default” (2022) - accepted, Journal of the European Economic Association
Abstract: I develop a model to study the optimal debt maturity structure and fiscal policy in an environment with incomplete markets, lack of commitment, and opportunity to default by the government. The default on public debt is endogenous and the real interest rate reflects the default risk and the marginal rate of substitution between present and future consumption. The maturity is used to resolve the time-consistency problem: The present government can incentivize future governments to stick to an ex ante optimal sequence of fiscal policies and interest rates. I show that if both risk-free interest rates and risk premiums can be manipulated, the optimal maturity structure tends to have a decaying profile: The government issues debt at all maturity dates, but the distribution of payments over time is skewed toward the short-term end. Debt maturity data across countries are consistent with model predictions.
“Solving sovereign debt models using endogenous grid method” with Lilia Maliar (2021)
(will be posted soon)
Kiiashko, S. (2018). Applications for DSGE Models in Central Banking: Key Issues Explored During Research Workshop of the National Bank of Ukraine. Visnyk of the National Bank of Ukraine, 246, 4-9. https://doi.org/10.26531/vnbu2018.246.004