institutions. Such an arrangement is inferior to an optimal inflation targeting, or a Rogoff-style central banker, whose optimal …

public spending. Under commitment, optimal stabilization is obtained by combining an inflation target that is contingent on … which it occurs. With only a shock-contingent inflation target, the political shock is spread out over time through debt … decumulate debt over time, so that in the long run all targets (for inflation, output and public spending) are attained. A …

alleviated by adopting state-contingent inflation targets (to combat the monetary policy commitment problem) and shock …

the ECB remains passive as average inflation in the union is unaffected. This result contrasts with the more widely held …

The paper explores the case for monetary and fiscal unification. Monetary policy suffers from an inflation bias because … suffers from moral hazard. An inflation target alleviates the inflation bias but weakens fiscal discipline. In a monetary …

If discretionary monetary policy implies an inflation bias, monetary unification boosts the accumulation of public debt …