We analyze risk sharing and fiscal spending in a two-region model with complete markets. Fiscal policy determines tax rates for each state of nature. When fiscal policy is decentralized, it can be used to affect prices of securities. To manipulate prices to their beneffit, regions choose...

This Paper uses an overlapping generations model to analyse monetary policy in a two-country model with asymmetric shocks. Agents insure against risk through the exchange of a complete set of real securities. Each central bank is able to commit to the contingent monetary policy rule that...