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 ...

We investigate the effects of fiscal policy surprises for US data, using vector autoregressions. We overcome the difficulties that changes in fiscal policy may manifest themselves in variables other than fiscal variables first and that fiscal variables may respond ”automatically” to business cycle conditions. We do so by using sign restrictions on the impulse responses as method of identificati...

We postulate a new method of measuring debt which we call the debt burden (DB). We claim that DB reveals the true debt obligations of the fiscal authority by taking the intertemporal debt obligations of the government into account. It is more accurate and more transparent than the currently used methods of assessing debt. DB is calculated on a daily basis and it clearly identifies debt risks. I...

We study optimal monetary and fiscal policies in a New Keynesian model with heterogeneous agents, incomplete markets, nominal rigidities. Our approach uses small‐noise expansions Fréchet derivatives to approximate equilibria quickly efficiently. Responses of aggregate shocks differ qualitatively from what they would be corresponding representative agent economy are an order magnitude larger. A ...

We show that the effectiveness of redistribution policy is tied to how much inflation it generates, and thereby, monetary-fiscal adjustments ultimately finance transfers. In monetary regime, taxes increase transfers while in fiscal rises, imposing on public debt holders. analytically regime generates larger more persistent than regime. a two-sector model, we quantify effects CARES Act COVID rec...