This paper studies optimal discretionary monetary policy and its interaction with fiscal policy in a New Keynesian model with finitely-lived consumers and government debt. Optimal discretionary monetary policy involves debt stabilization to reduce consumption dispersion across cohorts of...

This study investigates the appropriate measure of inflation in the euro area that the central bank should adopt in order to minimize social welfare losses stemming from volatility in the output gap, inflation and relative prices. We use a model that accounts for both the heterogeneity observed...