In this paper we construct a general theory of forward guidance in economic policy making, in order to provide a framework to explain the role and strategic advantages of including forward guidance as an explicit part of policy design. We do this by setting up a general policy problem in which...

In this paper we aim at two targets: i) to look for the theoretical roots of the EMU institutions and to check whether the current economic doctrine still supports them; ii) to discuss the appropriateness of these institutions and the policies adopted by European policymakers in order to exit...

In this paper we study policy reactions to the crisis across the Atlantic, with specific emphasis on its Eastern side. We want to explain the different attitude of European policymakers vis-à-vis their USA homologues and to this end we choose the perspective of the historical roots of European...

Social pacts, while improving macroeconomic performance, usually impose costs on unions. To facilitate the formation of such pacts, various substitutes can operate, such as the payment of transfers or, to some extent, the conservativeness of the government, union’s inflation aversion or...

This paper studies corporatism as the outcome of bargaining between the government and a representative labor union. We show that if negotiations between these two parties only relate to macroeconomic stabilization, corporatism can never be beneficial to both parties. As corporatist policies are...

Issues of policy effectiveness and neutrality are widespread in the economic literature. They have been increasingly raised in specific contexts within the class of LQ (linear-quadratic) policy games in the last 20 years, notably with reference to monetary policy. The more general conditions...

By considering a standard game between the Government and a centralised trade union, we investigate the robustness of the claim that corporatism has a positive effect on macroeconomic performance. We test this claim with respect to different kinds of non-co-operative equilibria, model...

Rational expectations are often used as an argument against policy activism, as they may undermine or neutralize the policymaker’s actions. Although this sometimes happens, rational expectations do not always imply policy invariance or ineffectiveness. In fact, in certain circumstances...

The introduction of rational expectations in the 1970s undermined the classical theory of economic policy laid down by Tinbergen, Theil and others. Since then rational expectations are often used as a strong argument against policy activism. However, rational expectations do not always imply...

The paper sketches some features of Caffè’s contribution to the construction, diffusion and applications of economic policy as a discipline, in addition to his personal traits and his qualities as a teacher. Not only was he one of the main proponents in Italy of the study of welfare economics...