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This paper analyses the international dimension of fiscal policy using a small open economy framework in which the … paper is that, once the open economy aspect of the policy problem is considered, it is not optimal to smooth taxes following … economy, the introduction of sticky prices can reduce the optimal volatility of taxes. …
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We study whether a central bank should deviate from its objective of price stability to promote financial stability. We tackle this question within a textbook New Keynesian model augmented with capital accumulation and microfounded endogenous financial crises. We compare several interest rate...
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