A simple stochastic equilibrium structure is used to study the implications of monetary and fiscal policy interactions for government intertemporal budget balance. Existence and uniqueness of monetary equilibria are shown to depend on parameters of policy rules. The paper derives closed form...

We study which policy tool and at what level a majority chooses in order to reduce activities with negative externalities. We consider three instruments: a rule, that sets an upper limit to the activity which produces the negative externality, a quota that forces a proportional reduction of the...