The theory and practice of stabilization policy has taken many turns as it evolved over the past century, oscillating between high hopes and deep skepticism regarding the capacity - and desirability - of governments taking responsibility for macroeconomic stability. This paper reviews the...

Fiscal policy is widely criticized for its failure to act as a stabilizing countercyclical force in the European Monetary Union. Two periods should be distinguished: Prior to the Financial Crisis of 2008, when monetary policy had traction to pursue stability for the aggregate eurozone, fiscal...

This paper explicitly models strategic interaction between two independent national fiscal authorities and a single central bank in a simple New Keynesian model of a monetary union. Monetary policy is constrained by the zero lower bound on nominal interest rates. Coordination of fiscal policies...