A simple stochastic equilibrium structure is used to study the implications of monetary and fiscal policy interactions for government intertemporal budget balance. Existence and uniqueness of monetary equilibria are shown to depend on parameters of policy rules. The paper derives closed form...

According to conventional wisdom, if deficits are inflationary then current deficits should predict subsequent movements in money growth. This paper USES a general equilibrium model fit to data to: (1) explore the policy behavior underlying this accepted viewpoint; (2) examine alternative...

Some writers have proposed that under European Monetary Union fiscal policies should be coordinated to reduce the degree of fiscal activism required for macroeconomic stabilization. The paper shows that, in theory, fiscal policy coordination may lower the degree of fiscal flexibility needed to...