We characterize Markov-perfect equilibria in a setting where the absence of government commitment affects the financing of productive public capital. We show that at any date, a government in office only considers intertemporal distortions over two consecutive periods in choosing taxes. We then use our framework to quantify the value of commitment, which we define as that obtained from binding ...

Is a balanced-budget rule compatible with a government honoring its debt obligations? According to the conventional explanation, governments honor their debt obligations to maintain a good reputation for future borrowing. The ability to borrow is desirable because it allows for greater tax smoothing. However, a balanced-budget rule limits the ability to smooth taxes, rendering a large class of ...

The fiscal position of many countries is worrying – and getting worse. Should formally independent central bankers be concerned about observed fiscal excesses spilling over to monetary policy and jeopardizing price stability? To provide some insights, this paper tracks the interactions between fiscal and monetary policies in the data across time and space. It makes three main contributions. The...

We find that between 20 and 25 percent of the negative covariance between excess returns and inflation is explained by shocks to monetary policy variables. The finding is robust to changes in the monetary policy rule that have occured during the 1966-1998 period. The result contradicts the theory that money supply shocks induce a positive correlation between inflation and returns. Our findings ...

To evaluate the Greenspan era, we nevertheless need to address three questions: Is his success due to talent or just luck? Does he have a system of monetary policy or is he himself the system? What will be his legacy? Greenspan was certainly lucky, but he was also clairvoyant. Above all, he has developed a profoundly original monetary policy. His confidence strategy is clearly opposed to the cr...

The retinal projection to the superior colliculus of the cat was examined at four gestational ages, embryonic days 38, 46, 56, and 61, using the antegrade transport of horseradish peroxidase and tritiated leucine. Gestation in the cat averages 65 days. By the 38th day of gestation (E38), the anlage of the entire superior colliculus, both ipsilateral and contralateral to an injection, was labele...

In this paper we focus our attention on the exploitation of the information contained in financial news to enhance the performance of a classifier of bank distress. Such information should be analyzed and inserted into the predictive model in the most efficient way and this task deals with all the issues related to text analysis and specifically analysis of news media. Among the different model...

Conjectures about inflation expectations are inextricably linked to our understanding of the relationship between the real and monetary sides of the economy; yet, direct empirical research on the matter has been scarce at best. This paper therefore examines the empirical properties of inflation expectations data constructed on the basis of both qualitative and quantitative surveys of consumers ...

Beginning with the Reserve Bank of New Zealand Act of 1989, central banking reforms have focused on assigning clear goals for which monetary policy authorities can be held accountable. Inflation targeting regimes provide examples of such goal-based policy frameworks. An alternative approach, recently argued for by John Taylor (2012, 2014), relies on a rule-based framework in which the policy au...

The purpose of this paper is to confront economic models of climate change with the reality that limited information exists with which to form expectations about the evolution of the climate. A key element in the tension between those who believe we should impose aggressive climate change mitigation policies and those who do not is the question of if we are merely in a long period of shock-indu...