The aim of this paper is twofold. First, it provides a simple framework for the analyses of the transitions between two steady states with different fiscal policies. This allows us to clarify the existing results on the possibility of Pareto-improving transitions from pay-as-you-go to fully...

In this paper we examine the implication of a simple class of fiscal rules for long-run economic growth and welfare. The Golden Rule of Public Finance that we examine is motivated by institutional arrangements in countries such as Germany and the UK. We find that rules that seek to limit...

In a New Keynesian macroeconomic model under credible commitment, price level targeting dominates inflation targeting. But with sufficient inflation aversion the inflation-targeting central bank can produce quantitatively similar results to one targeting the price level. The current degree of...

Following Hall (1997) it is increasingly common to incorporate preference, as well as productivity, perturbations in calibrated general equilibrium models. We assess the performance of a small open economy stochastic growth model (based on the Blanchard-Yaari framework) under alternative driving...

Central bank independence is widely thought be a sine qua non of a credible commitment to price stability. The surprise decision by the UK government to grant operational independence to the Bank of England in 1997 affords us a natural experiment with which to gauge the impact on the yield curve...