How do different levels of government debt affect the optimal conduct of monetary and fiscal policies? And what do these optimal policies imply for the evolution of government debt over time? To provide an answer, this paper studies a standard monetary policy model with nominal rigidities and...

When is it optimal for a government to default on its legal repayment obligations? We answer this question for a small open economy with domestic production risk in which the government optimally fi…nances itself by issuing non-contingent debt. We show that Ramsey optimal policies occasionally...

We document the presence of sizable distributional effects from unexpected price level movements in the Euro Area (EA) using sectoral accounts and newly available data from the Household Finance and Consumption Survey. The EA as a whole is a net winner of unexpected price level increases, with...