This paper examines the macroeconomic effects of unexpected, exogenous, simultaneous, temporary cuts to income tax rates in an economy when the government follows a balanced budget fiscal rule and keeps money supply constant, and private agents face constraints on the ability to finance...

Much recent monetary policy analysis has featured stochastic simulations with small structural macroeconomic models that include: a spending vs. saving ( IS') sector; a price-adjustment sector; and an interest rate policy rule. The first two are frequently specified so as to reflect optimizing...

Subject of the present study is the agent-based computer simulation of Agent Island. Agent Island is a macroeconomic model, which belongs to the field of monetary theory. Agent-based modeling is an innovative tool that made much progress in other scientific fields like medicine or logistics. In...

Although the IS/LM-AS/AD model is still the central tool of macroeconomic teaching in most macroeconomic textbooks, it has been criticized by several economists. Colander (1995) demonstrated that the framework is logically inconsistent, Romer (2000) showed that it is unable to deal with a...

Models of expextations formation via learning by economic agents have recently been developed in the literature. Currently, the most common approach leads to complete learning in which asymptotically agents have rational expectations (though cases of instability also exist). Dynamics with...

The effectiveness of alternative loss functions assigned to the common central bank of a monetary union is studied. The alternative policy objectives are a function of the degree of aggregation of decision variables. We consider, respectively, the policy based on the union-wide aggregates and...

Most African governments have made considerable progress in pursuing macroeconomic stabilization, usually under the tutelage of the International Monetary Fund. Policy targets for the IMF-supported programs are universally derived from some variation of the standard financial programming...

SINCE 1930, EXPECTATIONS HAVE PLAYED AN IMPORTANT ROLE IN ECONOMIC THEORY AND THIS IS BECAUSE ECONOMICS IS GENERALLY CONCERNED WITH THE IMPLICATIONS OF CURRENT ACTIONS FOR THE FUTURE. THIS PAPER THEREFORE ARGUES THAT THE DEVELOPMENT OF RATIONAL EXPECTATIONS THEORY WILL MAKE A MORE SIGNIFICANT...

For the open economy the workhorse model in intermediate textbooks still is the Mundell-Fleming model, which basically extends the IS-LM model to open economy problems. The purpose of this paper is to present a simple New Keynesian model of the open economy, that introduces open economy...