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After 2008, the Southern European economies suffered a strong and persistent increase in unemployment. Rising government bond spreads necessitated the implementation of austerity policies. Austerity however, may increase unemployment. If workers lose human capital during unemployment spells, the...
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This paper analyzes the political economy of government debt when elected politicians decide about the distribution of public funds between a clean and a polluting public good. When provision of the polluting good creates a stock of climate externalities, strategic incentives for the incumbent...
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We propose a novel framework where forward guidance (FG) is endogenously determined. Our model assumes that a monetary authority solves an optimal policy problem under commitment at the zero-lower bound. FG derives from two sources: 1. from commiting to keep interest rates low at the exit of the...
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We revisit the question whether U.S. fiscal policy in the pre-Volcker period was active or passive. To determine the policy stance, we estimate a DSGE model with monetary and fiscal policy interactions employing a sequential Monte Carlo algorithm (SMC) for posterior evaluation. In contrast to...
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