This paper analyzes the sustainability of fiscal debt contingent on fiscal policy operating in two fiscal regimes. The first regime is characterized by active policy (not reacting to debt) and the other by passive fiscal policy (reacting to debt). The average duration for which either regime can...

Financial institutions, especially in Europe, hold a disproportionate amount of domestic sovereign debt. We examine the extent to which this home bias leads to capital misallocation in a real business cycle model with imperfect information and fiscal stress. We assume banks can hold sovereign...

This paper deals with fiscal policy coordination within the European Monetary Union. In the first place, it investigates the potential problems which are caused by cross-country differences in key fiscal parameters and the asymmetric nature of these parameters. In the second section, the pros...

This paper deals with problems of fiscal consolidation and policy coordination within the European Monetary Union. In the first place, it investigates the potential problems which are caused by cross-country differences in key fiscal parameters and the asymmetric nature of these parameters. In...

In this paper we ask if central bank independence could lead to a bad fiscal position of some countries. Introducing autonomous central bank without changing other policy habits could expose the country to greater temptation to borrow money. We think that introducing high degree of CBI creates...

It has been argued that one advantage of EMU in the EU has been an improvement in the credibility of monetary policy. This paper provides a new way of assessing the credibility of monetary policy by analyzing the dispersion of inflation-unemployment observations over time. In this way, we may...

This paper investigates how government bond purchases affect leverage-constrained banks and non-financial firms by utilising a stochastic general equilibrium model. My results indicate that government bond purchases not only reduce non-financial firms' borrowing costs, amplified through a...

In this article we estimate the relationship between inflation and trade openness [e.g., Romer (1993)] using modern panel data techniques. The advantage here is that we are able to explicit test the hypothesis proposed by Terra (1998) that the negative relationship between openness and inflation...

We study the impact of the interaction between fiscal and monetary policy on the low-frequency relationship between the fiscal stance and inflation using crosscountry data from 1965 to 1999. In a first step, we contrast the monetary-fiscal narrative for Germany, the U.S. and Italy with evidence...

We study the equilibrium properties of a business cycle model with financial frictions and price adjustment costs. Capital-constrained entrepreneurs finance risky projects by borrowing from banks. Banks, in turn, make loans using equity and deposits. Because financial contracts are not...