We show how to use optimal control theory to derive optimal time-consistent Markov-perfect government policies in nonlinear dynamic general equilibrium models, extending the result of Cohen and Michel (1988) for models with quadratic objective functions and linear dynamics. We replace private...

This paper studies the impact government expenditure has on inflation by examining an augmented Phillips curve implied from a structural New Keynesian model, Our estimation results, based on external instruments, show that the augmented Phillips curve has a flatter slope than the canonical...

We build a tractable New Keynesian model to study four types of monetary and fiscal policy. We find that quantitative easing (QE), lump-sum fiscal transfers, and government spending have the same effects on the aggregate economy when fiscal policy is fully tax financed. Compared with these three...