We consider monetary-fiscal interactions when the monetary authority is more conservative than the fiscal. With both policies discretionary, (1) Nash equilibrium yields lower output and higher price than the ideal points of both authorities, (2) of the two leadership possibilities, fiscal...

The authors study a one-sector growth model where capital investment is credit financed and there is an adverse selection problem in credit markets. The presence of adverse selection creates an indeterminacy of equilibrium. Many equilibria display permanent fluctuations characterized by...