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...

This report is the final output of the study "Economic and Monetary Union and Enlargement" commissioned by the Directorate-General for Research of the European Parliament in May 1999. An Interim Report was provided in September 1999. The report reviews the mains policy issues concerning the...

Sufficiently flexible labour markets are considered an important precondition for countries to benefit from membership in the monetary union. Economic policy coordination within the European Community is extensive and includes issues related to labour market structures. In this paper we study...

This paper assesses the ECB’s performance, which the author finds to be seriously lacking but which is of paramount importance to understanding euroland’s ongoing stagnation and fragility. A main finding is that the series of policy blunders which characterized the bank’s conduct features...

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...

This paper proposes a simple framework for analyzing a continuum of monetary policy rules characterized by differing degrees of credibility, in which commitment and discretion become special cases of what we call quasi commitment. The monetary policy authority is assumed to formulate optimal...

The paper reviews the recent conduct of monetary policy and the central bank’s rule-based behavior in Russia. Using different policy rules, we test whether the central bank in Russia reacts to changes in inflation, output gap and the exchange rate in a consistent and predictable manner. Our...

Liquidity traps occur when the natural nominal interest rate becomes negative. In a model with capital price dynamics explicitly considered, we find that shocks in the future can cause current and lasting liquidity traps. We propose that the central bank can prevent or fix liquidity traps by...

This paper generalizes the classical theory of economic policy developed by Tinbergen and Theil to a static LQ-strategic context between n players. We show how this generalized version of controllability can profitably be used to deal with policy ineffectiveness issues and Nash equilibrium...

This paper introduces a general objective function for monetary policy that abandons certainty equivalence and features 'prudence'. It provides an alternative explanation for the positive relation between the level and variability of inflation, both across countries and over time. In particular,...