Since Leeper's (1991, Journal of Monetary Economics 27, 129-147) seminal paper, an extensive literature has argued that if fiscal policy is passive, that is, guarantees public debt stabilization irrespectively of the inflation path, monetary policy can independently be committed to inflation...

Since Leeper's (1991, Journal of Monetary Economics 27, 129-147) seminal paper, an extensive literature has argued that if fiscal policy is passive, i.e., guarantees public debt stabilization irrespectively of the inflation path, monetary policy can independently be committed to inflation...

European Union has taken economic and financial measures to cope with the debt crises erupted in 2009. These measures can be summarized as putting in place a bail-out mechanism and austerity measures, strengthening economic policy coordination, setting up “Stability and Growth Pact III” and...

New-style central banking in many advanced economies, involving the use of unconventional monetary policy instruments and forward guidance at the effective lower bound for interest rates, has raised questions about the appropriate role of fiscal policy – also in the euro area, where a fiscal...

Is inflation ‘always and everywhere a monetary phenomenon’ or is it fundamentally a fiscal phenomenon? This article augments a standard monetary model to incorporate fiscal details and credit market frictions. These ingredients allow for both interpretations of the inflation process in a...

This article is concerned with frequency-domain analysis of dynamic linear models under the hypothesis of rational expectations. We develop a unified framework for conveniently solving and estimating these models. Unlike existing strategies, our starting point is to obtain the model solution...

The sharp rise in public debt-to-GDP ratios in the aftermath of the financial crisis of 2008 posed serious challenges for fiscal policy in the euro area countries and culminated for some member states in a sovereign debt crisis. This note examines the public policy responses to the euro area...

This paper expands the growing literature on common safe assets in the context of the euro area financial system by employing credit risk simulation techniques to investigate the properties of different safe asset models and their impact on national bond markets. The paper explores in particular...

This paper examines the relationship between fiscal variables and inflation for 46 countries from 1960–2017 using a linear identity that links inflation to fiscal and monetary variables and economic growth. The results indicate that inflation is affected by both monetary and fiscal policies....

We evaluate the stabilization properties of several rules and instruments to reduce government debt in a Currency Union, like the EMU. In a two-country New-Keynesian DSGE model, with a debt-elastic government bond spread and incomplete international financial markets, we study the effects of...