We study cointegrating relationships among fiscal variables and output and use them to introduce a new measure of the government's fiscal position. In the US since World War II, we find that the primary surplus-GDP ratio and the government debt-GDP ratio are nonstationary, which invalidates...

The European Central Bank is unique in setting monetary policy for several sovereign states with heterogeneous debt levels and different maturity structures. The monetary-fiscal nexus is central to the functioning of the euro area. We focus on one particular aspect of that nexus, the effect the...

As a result of the BoJ's large-scale asset purchases, the consolidated Japanese government borrows mostly at the floating rate from households and invests in longer-duration risky assets to earn an extra 3% of GDP. We quantify the impact of Japan's low-rate policies on its government and...

Governments around the world have gone on a massive fiscal expansion in response to the Covid crisis, increasing government debt to levels not seen in 75 years. How will this debt be repaid? What role do conventional and unconventional monetary policy play? We investigate debt sustainability in...

The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of real primary surpluses. Monetary policy remains important. The central bank can set an interest rate target, which determines the path of expected inflation, while news about the...

Our current inflation stemmed from a fiscal shock. The Fed is slow to react. Why? Will the Fed's slow reaction spur more inflation? I write a simple model that encompasses the Fed's mild projections and its slow reaction, and traditional views that inflation will surge without swift rate rises....

The Covid pandemic disrupted supply chains and labor markets, with heterogeneous effects on demand and supply across industries. Meanwhile governments responded with unprecedented stimulus packages, and inflation increased to its highest values in 40 years. In this paper I investigate the...

In response to the Global Financial Crisis, central banks engaged in large-scale asset purchases funded by the issuance of reserves. These "unconventional" policies continued during the pandemic, so that by 2022 central banks' balance sheets had grown up to ten-fold. As a result of rapidly...

Advanced economies borrowed substantially during the Covid recession to fund their fiscal policy. The Covid recession differed from the Great Recession in that sovereign debt markets remained calm and spreads barely responded. We study the experience of Greece, the most extreme manifestation of...

This paper studies the macroeconomic effects of energy price shocks in energy-importing economies using a heterogeneous-agent New Keynesian model. When MPCs are realistically large and the elasticity of substitution between energy and domestic goods is realistically low, increases in energy...