The presence of the lagged shadow policy rate in the interest rate feedback rule reduces the government spending multiplier nontrivially when the policy rate is constrained at the zero lower bound (ZLB). In the economy with policy inertia, increased inflation and output due to higher government...

We propose an integrated treatment of the problems of optimal monetary and fiscal policy, for an economy in which prices are sticky (so that the supply-side effects of tax changes are more complex than in standard fiscal analyses) and the only available sources of government revenue are...

This paper reviews empirical evidence about the effects of changes in U.S. monetary policy and fiscal policy that has been accumulated during recent years in a series of collaborative research projects involving a variety of global macroeconometric models. The paper also considers, in...

Coordination of macroeconomic policy has been a major topic at recent summit meetings, and has been the subject of a number of theoretical studies. However, relatively little empirical research exists on policy coordination. This paper is an attempt to help fill this gap. The paper considers the...

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...

This paper asks whether an aggressive monetary policy response to inflation is feasible in countries that suffer from fiscal dominance, as long as monetary policy also responds to fiscal variables. We find that if nominal interest rates are allowed to respond to government debt, even aggressive...