In this paper we use the common perspective provided by the neoclassical growth model to evaluate the size of the distortions associated with different monetary and fiscal policies designed to finance a given sequence of government expenditures. We calibrate a neoclassical monetary economy to match important features of the U.S. economy and use it to provide a quantitative assessment of the wel...

Using a nonlinear structural VAR approach, we estimate the effects of exogenous monetary impulses in the presence of a zero lower bound constraint on nominal interest rates and examine the impact of such a constraint on the effectiveness of counter-cyclical monetary policies. We find that a binding zero bound on nominal interest rates can eliminate more than 50% of the effect of an exogenous mo...

This paper reformulates the issue of the international coordination of monetary policy in the framework of an extended game with observable delay, where governments are required to set the timing of their respective actions before proceeding to the actual choice of their monetary policies. This allows to shrink signi...cantly the set of equilibria. JEL Classi...cation: D43, E61, F41, F42

Using an estimated DSGE model that features monetary and fiscal policy interactions and allows for equilibrium indeterminacy, we find that a passive monetary and passive fiscal policy regime prevailed in the pre-Volcker period while an active monetary and passive fiscal policy regime prevailed post-Volcker. Since both monetary and fiscal policies were passive pre-Volcker, there was equilibrium ...

Abstract Using an estimated DSGE model that features monetary and fiscal policy interactions and allows for equilibrium indeterminacy, we find that a passive monetary and passive fiscal policy regime prevailed in the pre-Volcker period while an active monetary and passive fiscal policy regime prevailed post-Volcker. Since both monetary and fiscal policies were passive pre-Volcker, there was equ...

Empirical data shows that current account has the property of mean-reversion and the speed of current account convergence is heterogenous across countries. In order to explore the factors which affect the current account adjustment speed of a small country, this paper builds up a model to study how current account would be affected by factors such as labor supply and monetary policies. We found...

We study a dynamic equilibrium model in which agents have adaptive expectations and monetary authorities pursue an inflation target. We show how alternative monetary stabilization policies become more effective when fiscal constraints on deficits are implemented, although they are not binding at the equilibrium target. In particular, we show that the inflation target equilibrium can be locally,...

Once upon a time, protection of human health and the natural environment did not seem to require economic analysis. Before the 1980s, public health and environmental policies were debated primarily on scientific, ethical, and legal grounds, with less emphasis on costs – let alone monetized benefits. More recently, it has become the norm to assume the need for cost-benefit analysis of new polici...

We examine global economic dynamics under learning in a New Keynesian model in which the interest-rate rule is subject to the zero lower bound. Under normal monetary and fiscal policy, the intended steady state is locally but not globally stable. Large pessimistic shocks to expectations can lead to deflationary spirals with falling prices and falling output. To avoid this outcome we recommend a...

This paper analyses the design of macroeconomic policies for Slovenia during the process of full integration into the European Economic and Monetary Union (EMU). “Optimal” monetary and fiscal policies are determined as solutions of optimum control problems with a quadratic objective function and the macroeconometric model SLOPOL as constraint. Several optimization experiments under a flexible e...