This paper uses a factor-augmented vector autoregressive model (FAVAR) estimated on U.S. data in order to analyze monetary transmission via private sector balance sheets, credit risk spreads and asset markets in an integrated setup and to explore the role of monetary policy in the three...

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...

I analyze how the introduction of financial frictions can affect the trade-off between output stabilization and inflation stability and whether, in the presence of financial frictions, the optimal outcome can be realized or approached more closely if monetary policy is allowed to react to...

In this paper we consider inflation and government debt dynamics when monetary policy employs a global interest rate rule and private agents’ forecasts using adaptive learning. Because of the zero lower bound on interest rates, active interest rate rules are known to imply the existence of a...

Using an optimisation-based model with endogenous labour supply and a proportional tax rate, we compare the stabilising properties of different fiscal policy rules. The economy is affected by shocks from both government spending and technology. The fiscal policy rule can be based on government...

In this paper we introduce an application of the supply-side channel for fiscal policy to the basic New Keynesian model. We use a proportional tax rate instead of lump sum tax and introduce the distortions of a tax wedge. We derive a closed economy forward-looking model with government...

Global liquidity expansion has been very dynamic since 2001. Contrary to conventional wisdom, high money growth rates have not coincided with a concurrent rise in goods prices. At the same time, however, asset prices have increased sharply, significantly outpacing the subdued development in...

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...