DSGE models based on New Keynesian principles, which have been extended to allow for banking, the zero lower bound on interest rates (ZLB), and varying price duration, can account well for recent macroeconomic behavior across a variety of economies. These models Önd that active Öscal policy...

We construct a macro DSGE model of the eurozone and its two main regions, the North and the South, with the aim of matching the macro facts of these economies by indirect inference and using the resulting empirically-based model to assess possible new policy regimes. The model we have found to...

Was Spanish fiscal policy destabilizing? We estimate policy reaction functions and test the impact of fiscal shocks on growth volatility over the period 19501998. We find that a transition from pro-cyclical to countercyclical fiscal policy occurred in the late years of the Franco regime,...

Was Spanish fiscal policy destabilizing? We estimate policy reaction functions and test the impact of fiscal shocks on growth volatility over the period 1950-1998. We find that a transition from pro-cyclical to countercyclical fiscal policy occurred in the late years of the Franco regime,...

We build a model to study the interaction between default risk, policy changes, and financial frictions within a monetary union. The model features a centralised central bank and decentralised fiscal authorities. Countries have different reputations for fiscal stability, modelled as different...

We develop an endogenous growth model with public consumption and infrastructure services provided by two-tier governments. Growth performance and welfare implication are compared under the centralized and decentralized fiscal federal systems. In general, there is a trade-off between welfare and...

This paper explores the link between default risk and fiscal procyclicality. We show that countries with higher sovereign risk have a more procyclical fiscal expenditure policy, which is driven mostly by transfers. We build a small open economy model with income inequality, social transfers, and...

We investigate whether the Fiscal Theory of the Price Level (FTPL) can explain UK inflation in the 1970s. We confront the identification problem involved by setting up the FTPL as a structural model for the episode and pitting it against an alternative Orthodox model; the models have a reduced...

We investigate whether the Fiscal Theory of the Price Level (FTPL) can explain UK inflation in the 1970s. We confront the identification problem involved by setting up the FTPL as a structural model for the episode and pitting it against an alternative Orthodox model; the models have a reduced...

Distortionary income taxation in a standard New Keynesian model substantially increases the nominal term-premium on long-term bonds relative to a model with lumpsum taxes. Also the empirical level of the nominal term premium can be matched with lower risk-aversion coefficient in case of a model...