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This paper analyzes past fiscal consolidation plans and their outcomes in France. It covers the early attempts at fiscal consolidation in the 1970s and the 1980s (Plan Barre and Virage de la Rigueur), the first episode of medium-term fiscal consolidation in 1994-97 ahead of joining the European Economic and Monetary Union, and the fiscal consolidation under the corrective arm of the European Stability and Growth Pact in 2003-07. These experiences offer important lessons for the future, suggesting that binding constraints help focus policymakers’ attention and justify their actions; spending restraint needs to be shared and coordinated across all levels of government; and appropriate deficit targets could help in enforcing budgetary discipline in good times.

Fiscal policy --- Budgeting --- Macroeconomics --- Public Finance --- Debt --- Debt Management --- Sovereign Debt --- National Government Expenditures and Related Policies: General --- Fiscal Policy --- National Budget --- Budget Systems --- Public finance & taxation --- Budgeting & financial management --- Expenditure --- Government debt management --- Fiscal consolidation --- Public debt --- Budget planning and preparation --- Debts, Public --- Expenditures, Public --- Budget --- France

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Voluntary and government-mandated lockdowns in response to COVID-19 have caused causing drastic reductions in economic activity around the world. We present a parsimonious two-country-SIR model with some degree of substitutability between home and foreign goods, and show that trading partners’ asynchronous entries into the global pandemic induce mutual welfare gains from trade. Those gains are realized through exchange rate adjustments that cause a temporary reallocation of production towards the economy with the lowest infection rate at any point in time. We show that international cooperation over containment policies that aim at optimizing global welfare further enhances the ability of countries to exploit trade opportunities to contain the spread of the pandemic. We characterize the Nash game of strategic choices of containment policies as a prisoners’ dilemma.

China, People's Republic of --- Business and Economics --- Health and Fitness --- Exports and Imports --- Macroeconomics --- Taxation --- Diseases: Contagious --- General Aggregative Models: General --- Macroeconomic Aspects of International Trade and Finance: General --- Public Economics: General --- Health: General --- Macroeconomics: Consumption --- Saving --- Wealth --- Empirical Studies of Trade --- Labor Economics: General --- Business Taxes and Subsidies --- Health Behavior --- International economics --- Labour --- income economics --- Public finance & taxation --- Infectious & contagious diseases --- Consumption --- Terms of trade --- Labor --- Consumption taxes --- COVID-19 --- National accounts --- Health --- International trade --- Taxes --- Economics --- Economic policy --- nternational cooperation --- Labor economics --- Spendings tax --- Communicable diseases

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Is aggressive monetary policy response to inflation feasible in countries that suffer from fiscal dominance? We find that if nominal interest rates are allowed to respond to government debt, even aggressive rules that satisfy the Taylor principle can produce unique equilibria. However, resulting inflation is extremely volatile and zero lower bound on nominal interest rates is frequently violated. Within the set of feasible rules the optimal response to inflation is highly negative, and more aggressive inflation fighting is inferior from a welfare point of view. The welfare gain from responding to fiscal variables is minimal compared to the gain from eliminating fiscal dominance.

Banks and Banking --- Inflation --- Public Finance --- Price Level --- Deflation --- Interest Rates: Determination, Term Structure, and Effects --- National Government Expenditures and Related Policies: General --- Fiscal Policy --- Macroeconomics --- Finance --- Public finance & taxation --- Expenditure --- Zero lower bound --- Real interest rates --- Fiscal policy --- Prices --- Interest rates --- Expenditures, Public --- Monetary policy --- Econometric models.