Distributional consequences typically receive limited attention in economic models that analyze the effects of monetary and financial sector policies. These consequences deserve more attention since financial markets are incomplete, imperfect, and economic agents' access to them is often...

How can we fit different monetary transmission channels together to understand the effect of China¡¯s monetary policy? This paper focuses on China¡¯s monetary conditions and aggregate demand in terms of the monetary conditions index (MCI), which has been widely used as an important indicator...

This paper examines under what conditions fiscal policy in the form of government spending should contribute to macroeconomic stabilisation.  To this end optimal fiscal targeting rules minimising the microfounded social loss are examined in the following settings.  Firstly, for the benchmark...

This paper aims an empirical investigation of uncertainty in the Euro Zone as well as the US. For this purpose I conduct a factor analysis of uncertainty measures starting in 2001 until the end of 2011. I use survey-based data provided by the ECB and the Federal Reserve Bank of Philadelphia as...

The European sovereign debt crisis represents an interesting opportunity to investigate the reaction of the European Central Bank as a crisis fighting institution and the importance of central bank personalities in policy execution. Accordingly, this paper aims at investigating to what extent...

This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality condition for the GDP growth rate (i.e. the GDP growth...

The European Central Bank (ECB) decided at its Council meeting in January to implement a comprehensive program to purchase bonds, including euro area government bonds. The purchases are intended to anchor the rate of inflation and inflation expectations at below but close to two percent again....

The European Central Bank (ECB) decided to implement a comprehensive program to purchase bonds, including government bonds, at its Council meeting in January. The purchases are intended to anchor the rate of inflation and inflation expectations at just under two percent again. Given its lack of...

This paper uses a New Keynesian framework to study the coordination of fiscal and monetary policies, in response to an inflation shock when the policymaker acts with commitment. We first show that, in the simplest New Keynesian model, fiscal policy plays no part in the optimal policy response,...

This paper studies a simple New-Keynesian model of fiscal and monetary policy coordination when the policymaker acts under commitment. With a New Keynesian Phillips curve it is optimal to control inflation only through the use of monetary policy. But, when price-setters use a Steinsson (2003)...