Template-Type: ReDIF-Paper 1.0
Title: Being and Consciousness: Fiscal Attitudes according to HANK
Author-Name: Christian Bayer
Author-Email: christian.bayer@uni-bonn.de
Author-Name: Alexander Kriwoluzky
Author-Email: akriwoluzky@diw.de
Author-Name: Gernot J. Müller
Author-Email: gernot.mueller@uni-tuebingen.de
Author-Name:  Fabian Seyrich
Author-Email: fabian.seyrich@gmail.com
Classification-JEL: E32, H63, F45
Keywords: HANK, Two-country model, Political Economy, Government debt, Fiscal policy, household heterogeneity


Abstract: Attitudes toward fiscal policy differ: fiscal conservatism and fiscal liberalism varyin 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.
Note: 
Length: 49
Creation-Date: 2025-07
Revision-Date:
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp694
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2024_694