This paper studies the welfare effects of monetary and fiscal policy rules, in a dynamic general equilibrium model with sticky prices. The model features capital accumulation and endogenous labor effort, and exogenous productivity shocks. Government purchases are valued positively by the private...

The natural rate of interest -- the real interest rate consistent with output equaling potential -- plays an important role in both economic forecasting and monetary policy. Much of the literature has assumed that the natural rate of interest is constant. For example, the Taylor rule includes a...

We study the the emergence of multiple equilibria in models with capital and bonds under various monetary and fiscal policies. We show that the presence of capital is indeed another independent source of local and global multiplicites, even under active policies that yield local determinacy. We...

This paper focuses on the role of government capital as a critical productive input when the level of services that the agent derives from it is subject to congestion. I develop a two-sector “non-scale†production model in which there are two types of firms, conventional...

This paper develops and simulates a three-period life-cycle model with aggregate uncertainty. The model incudes a market in risk-free bonds. The paper studies how uncertainty in fiscal policy affects welfare, the equity premium, risk-sharing, and the caculation of generational accounts.

The monetary instrument problem is examined in an endowment economy model with various stochastic disturbances, with minimizing the variance of inflation as the policy objective. Following current developments in the theory of fiscal determination of the price level, for different monetary...

We reconsider the macroeconomic effects of fiscal policy in the context of a new-keynesian dynamic stochastic general equilibrium model. We assume that a fraction of the agents are non Ricardian and estimate the model parameters using Bayesian techniques. Our results show that the estimates of...

Recent empirical evidence suggests that private consumption is crowded-in by government spending. This outcome violates existing macroeconomic theory, according to which the negative wealth effect brought about by a rise in public expenditure should decrease consumption. In this paper, we...

Sudden and protracted oil-price increases are generally accompanied by economic contractions and high inflation. How should monetary policy react to oil-price shocks in order to minimize such adverse macroeconomic effects? We build a DSGE model characterized by two oil-importing countries and...