The last few years papers have begun to analyse optimal monetary and fiscal policy in models incorporating nominal rigidities where social welfare is derived from the utility of agents. This paper examines whether this analysis provides support for the consensus assignment, where monetary policy...

In a monetary union where fiscal authorities act strategically fiscal cooperation is unlikely to emerge as an equilibrium. Even when the cooperative outcome is the best for a national fiscal authority, it is either not a Nash equilibrium, or only one of several Nash equilibria. The monetary...

We examine the impact of different degrees of fiscal feedback on debt in an economy with nominal rigidities where monetary policy is optimal. We look at the extent to which different degrees of fiscal feedback enhance or detract from the ability of the monetary authorities to stabilize output...

In this paper we present two examples where the presence of inflation persistence could influence the qualitative nature of monetary policy. In the first case the desirability of a monetary policy regime comes under question when extensive inflation persistence exists. In the second case the...

In this paper we study the degree of precommitment that is required to eliminate multiplicity of policy equilibria, which arise if the policy maker acts under pure discretion. We apply a framework developed by Schaumburg and Tambalotti (2007) and Debortoli and Nunes (2010) to a standard New...

This paper investigates the conduct of monetary and fiscal policy in the post-ERM period in the UK. Using a simple DSGE New Keynesian model of non-cooperative monetary and fiscal policy interactions under fiscal intra-period leadership, we demonstrate that the past policy in the UK is better...

We demonstrate the existence of multiple discretionary equilibria in a mainstream New Keynesian model with capital accumulation. There can be two monetary policy regimes, both of which satisfy conditions of optimality and time consistency. In a response to a cost-push shock one of the regimes...

This paper investigates the importance of fiscal policy in providing macroeconomic stabilisation in a monetary union. We use a microfounded New Keynesian model of a monetary union which incorporates persistence in inflation and non-Ricardian consumers, and derive optimal simple rules for fiscal...

We study a Markov-perfect monetary policy in an open New Keynesian economy with incomplete financial markets. We analyze inflation and exchange rate targeting regimes and demonstrate that both cases may result in multiple equilibria. These equilibria feature qualitatively and quantitatively...

The fiscal policy environment central banks operate in can be radically different with respect to debt levels, maturity structures and whether or not fiscal adjustments are spending or tax based. Despite this, most analyses of monetary policy delegation schemes typically ignore the behavior of...