We investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest spreads contained in bond yields of the countries now belonging to the Eurozone. Deficits significantly increase risk premia measured by relative swap...

Macroeconomic Policies of the Economic and Monetary Union: Theoretical Underpinnings and Challenges Philip Arestis and Malcolm Sawyer, The Levy Economics Institute and Leeds University Abstract This paper presents two issues: first, an effort to decipher the type of economic analysis and...

This paper describes the Federal Reserve's analytical framework under Volcker and Greenspan, as it was constructed in the early 1980s, during a period of high inflation. It traces the modeling and policy implications of this framework. It discusses the Fed's actual track record and the state of...

We consider the properties of two monetary policy rules ("strict inflation targeting", "constant money growth rule") in an intertemporal equilibrium model with flexible prices in which monetary policy is "active", while fiscal policy is "passive". Specifically, we assume that the fiscal agent...

This paper develops a small New Keynesian model with capital accumulation and government debt dynamics. The paper discusses the design of simple monetary and fiscal policy rules consistent with determinate equilibrium dynamics in the absence of Ricardian equivalence. Under this assumption,...

We consider the properties of two monetary policy rules (monetary targeting, Taylor-type interest rate rule) in an intertemporal equilibrium model with capital accumulation and two outside assets (government bonds, fiat money). The paper shows that the long-run behaviour of the economy depends...