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...

On the basis of a model on time consistent interaction of monetary and fiscal policy, we propose a positive theory of government debt and inflation. The basic take is that the long-term level of public liabilities can be explained as the endogenous outcome of a dynamic game played between two...

In this paper we develop an algorithm to numerically solve dynamic stochastic overlapping generations economies. In our model agents live for six periods and face idiosyncratic as well as aggregate uncertainty with respect to their labor and capital income. Insurance markets are absent and...

Cyclical components are analytically computed in a theoretical model of stochastic endogenous fluctuations and growth. Volatility is shown to depend on the speed of convergence of the cyclical component, the expected length of a cycle and on the altitude of the slump. Taxes affect these channels...

Over the past decade, questions over the impact of new information technologies on productivity growth trends have played an important role in the formulation of monetary policy, particularly in the United States and Canada. However, formal testing of whether the trend growth rate of aggregate...

This paper studies optimal tax policy problem by employing a two-country dynamic general equilibrium model with incomplete asset markets. We investigate the possibility of welfare-improving active, contingent tax policies (under which tax rates respond to changes in productivity) on capital and...

The choice between private and government provision of a productive public good like infrastructure (public capital) is examined in the context of an endogenously growing open economy. The accumulation of public capital need not require government provision, in contrast to the standard...

This paper analyses welfare-improving monetary policy reaction functions in the context of a new-Keynesian small open economy model with a tradables and a non-tradables sector. The model is estimated for the case of Canada and used to evaluate the welfare gains of alternative specifications of...

This paper employs a stochastic endogenous growth model with productive government expenditure to analyze the macroeconomic effects of income taxation. We demonstrate that in the presence of capital and income risk the impact of taxation on consumption choice as well as on economic growth is...