This paper provides a resolution of the non-uniqueness of reputational equilibria in the Barro-Gordon monetary policy game. We introduce a `chisel-proof' credibility condition which ensures that in response to a small deviation from the low inflation rate by the central bank, it never pays for...

The paper emphasizes the distinction between the purely fiscal reasons for fiscal policy coordination under EMU (given a credible low-inflation policy by the ECB), and the spillover effects of an uncoordinated fiscal policy on monetary policy. The worst scenario is where an independent ECB sets...

This paper re-examines the issue of the credibility and sustainability of optimal policies derived from Pontryagin's Maximum Principle and generally regarded as time-inconsistent, in models with forward-looking rational expectations. Specifically, it considers the behaviour of such models in the...

This paper examines the conduct of monetary policy in an economy with overlapping multi-period nominal wage contracts. We examine the welfare implications of stabilization policy in the face of random supply shocks. In the absence of precommitment, the discretionary policy can be improved by...

The effect of asymmetric information on monetary policy is investigated in the context of an overlapping wage contract model. Optimal rules with and without precommitment under full information are compared with the optimal rule without precommitment (i.e. the discretionary rule) under...

This paper addresses the conduct of monetary and fiscal policy in a closed trading bloc consisting of ‘ins’ forming a monetary union and ‘outs’ who retain monetary sovereignty. All governments can opt for a particular choice of institutional arrangement for their central bank (CB),...

Sales of arms are a significant component of international trade and raise a range of pressing policy issues. After a short review of the market, this paper provides a formal model of the trade which allows for competing, forward-looking suppliers whose welfare depends on both the economic...

This paper examines three questions concerning the international coordination of macroeconomic policy. First it examines whether it is advantageous for governments to cooperate in the determination of monetary and fiscal policies. Second it asks whether it is helpful for governments to establish...

This paper provides a comprehensive assessment of the open economy aspects of the 'delegation game' in which the operation of monetary policy is delegated to independent and `conservative' central bankers with a greater dislike of inflation than the public. When all countries optimally and...

This paper considers fiscal policy coordination in a European Economic and Monetary Union (EMU). We use an overlapping generations model which leads to departures from Barro-Ricardian neutrality. In our calibrated model, however, we find these departures to be rather small. Two models are...