Ramsey models of fiscal and monetary policy with perfectly-competitive product markets and a fixed supply of capital predict highly volatile inflation with no serial correlation. In this paper, we show that an otherwise-standard Ramsey model that incorporates capital accumulation and habit...

This paper analyzes the specific role of fiscal policy on the welfare effects of macroeconomic stabilization policies. We extend current DSGE models à la Schmitt-Grohè and Uribe (2003) to a non-tandard fiscal policy framework. We focus on distortionary and progressive taxation which alters the...

We determine the optimal degree of price inflation volatility when nominal wages are sticky and the government uses state-contingent inflation to finance government spending. We address this question in a well-understood Ramsey model of fiscal and monetary policy, in which the benevolent planner...

This paper considers the nominal and real determinacy of equilibria under an exogenously specified path of interest rates in an economy in which taxation is either lump-sum or distortionary. Under lump-sum taxation, we confirm the well-known finding that equilibria display nominal...

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...

Unstable government debt dynamics can typically be corrected by various fiscal instruments, like appropriate adjustments in government spending, public transfers, or taxes. This paper investigates properties of state-contingent debt targeting rules which link stabilizing budgetary adjustments...

We study monetary and fiscal policy games in a dynamic sticky priceeconomy where monetary policy sets nominal interest rates and fiscal policy provides public goods financed with distortionary labor taxes. We compare the Ramsey outcome to non-cooperative policy regimes where one or both...

In this paper we show that a model featuring durables consumption, weak credibility, and sticky prices can explain many of the stylized facts associated with exchange-rate-based stabilization, including the quantitative variation exhibited by key macroeconomic variables. In standard models, the...

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...