Using an optimisation-based model with endogenous labour supply and a proportional tax rate, we compare the stabilising properties of different fiscal policy rules. The economy is affected by shocks from both government spending and technology. The fiscal policy rule can be based on government...

In this paper we analyse the monetary impact of alternative fiscal policy rules using the debt and deficit, both mentioned as measures of fiscal policy performance in the Stability and Growth Pact (SGP). We use a New Keynesian model, with endogenous labour supply, distortionary taxation and no...

In this paper we introduce an application of the supply-side channel for fiscal policy to the basic New Keynesian model. We use a proportional tax rate instead of lump sum tax and introduce the distortions of a tax wedge. We derive a closed economy forward-looking model with government...

Economic and Monetary Union (EMU) can be characterised as a complicated set of legislation and institutions governing monetary and fiscal responsibilities. The measures of fiscal responsibility are to be guided by the Stability and Growth Pact (SGP), which sets rules for fiscal policy and makes...