Precis: Monetary and fiscal policies are examined in a steady-state small open economy model. Com­ plete price taking behaviour implies that domestic output is supply determined and invariant to domestic shocks. Balanced budget fiscal policy does, however, alter equilibrium real disposable income. As the terms of trade do not vary with the exchange rate regime the effectiveness of macro policie...

A simple model of monetary/labor search is constructed to study Keynesian indeterminacy and optimal policy. In the model, economic agents have trouble splitting the surplus from exchange appropriately, and we consider monetary and fiscal policies that correct this Keynesian inefficiency. A Taylor rule does not imply determinacy, nor does it support an efficient outcome. Optimal policies yield a...

We estimate a model in which fiscal and monetary policy obey the targeting rules of distinct authorities, with potentially different objective functions. find: (1) Time‐consistent fits U.S. time series at least as well instrument‐rules‐based behavior; (2) American policies often do not conform to conventional mix conservative debt‐stabilizing policy, although economic agents expect stabilize de...

The objective of this study is to investigate the behaviour of monetary and fiscal authorities in the Euro area. Our main contribution is joint modelling of behaviour of the two authorities. Our investigation highlights a number of facts. The systematic monetary policies adopted by the non-German authorities in the seventies were not capable of stabilizing inflation. Such results has been achie...