The present paper reassesses the role of monetary conservatism in a setting with nominal government debt and endogenous fiscal policy. We assume that macroeconomic policies are chosen by monetary and fiscal policy makers who interact repeatedly but cannot commit to future actions. The real level of public liabilities is an endogenous state variable, and policies are chosen in a non-cooperative ...

Starting in the early 1990s, the New Open Economy Macroeconomics refers to a vast body of literature embracing a new theoretical framework for policy analysis in open economy, with the goal of overcoming the limitations of the Mundell-Fleming model, while preserving the empirical wisdom and policy friendliness of traditional analysis. Building general equilibrium models with imperfect competiti...

The recent crisis has highlighted the need for a “macroprudential policy” ensuring financial stability. One of the key aspects of this forthcoming macroprudential policy is the setting of bank capital requirements conditionally on the state of the economy—what the Basel Committee on Banking Supervision (2010) calls the “countercyclical capital buffer.” This raises the issue of the interactions ...

Are the recessionary consequences of oil-price shocks due to oil-price shocks themselves or to contractionary monetary policies that arise in response to inflation concerns engendered by rising oil prices? Can systematic monetary policy be used to alleviate the consequences of oil shocks on the economy? This paper builds a dynamic general equilibrium model of monopolistic competition in which o...

The author presents a search-based model in which money coexists with equity shares on a risky aggregate endowment. Agents can use equity as a means of payment, so shocks to equity prices translate into aggregate liquidity shocks that disrupt the mechanism of exchange. The author characterizes a family of optimal monetary policies and finds that the resulting equity prices are independent of mo...