We examine the impact of different degrees of fiscal feedback on debt in an economy with nominal rigidities where monetary policy is optimal. We look at the extent to which different degrees of fiscal feedback enhances or detracts from the ability of the monetary authorities to stabilise output...

In models with a representative infinitely lived household, modern versions of tax smoothing imply that the steady-state of government debt should follow a random walk.  This is unlikely to be the case in OLG economies, where the equilibrium interest rate may differ from the policy-maker's rate...

Recent attempts to incorporate optimal fiscal policy into New Keynesian models subject to nominal inertia, have tended to assume that policy makers are benevolent and have access to a commitment technology.  A separate literature, on the New Political Economy, has focused on real economies...

Most recent work deriving optimal monetary policy utilising New Neo-Classical Synthesis (NNCS) models abstract from the impact of monetary policy on the government`s finances, by assuming that any change in the government`s budget can be financed through lump sum taxes. In this paper, we assume...

A common feature of exchange rate misalignments is that they produce a divergence between traded and non-traded goods sectors, leading to pressures on monetary policy makers to react. In this paper we develop a small open economy model which features traded and non-traded goods sectors with...