Using data for the United States over the period 1973-2019, we find that there is a long-run stable relationship showing that the real interest rate is determined by real investment, real money supply, the velocity of circulation, and the rates of wages, economic growth, technological change,...

One of the main contributions of Modern Money Theory (MMT) has been to explain why monetarily sovereign governments have a very flexible policy space that is unconstrained by hard financial limits. Not only can they issue their own currency to pay public debt denominated in their own currency,...

We contribute to the growing empirical literature on monetary and fiscal interactions by applying a sign restriction identification scheme to a structural TVP-VAR in order to disentangle and evaluate the policy shocks and policy transmissions. This in turn allows us to study the Great Recession...

In this paper, we build a dynamic stochastic general-equilibrium model with housing and household debt, and compare the effectiveness of monetary policy, housing-related fiscal policy, and macroprudential regulations in reducing household indebtedness. The model features long-term fixed-rate...

This paper briefly summarizes the orthodox approach to banking, finance, and money, and then points the way toward an alternative based on socioeconomics. It argues that the alternative approach is better fitted to not only the historical record, but also sheds more light on the nature of money...

Locating the appropriate degree of interaction between fiscal and monetary policy plays an important role in ensuring economic stability. Their joint impact is, however, still unclear. We observe significant differences in the transmission of shocks, in particular between the Great Recession and...

This paper studies the main channels through which interest rate normalization has fiscalimplications in the United States. While unexpected inflation reduces the real value ofgovernment liabilities, a rising policy rate increases government financing needs because ofhigher interest payments and...

Fiscal stimulus was widely advocated during the global crisis, a period characterized by monetary policy constrained by the effective lower bound (ELB) in many countries, in part because of expected positive spillovers. Standard New Keynesian models predict the cross-border transmission of...

This paper employs a two-country New Keynesian DSGE model to assess the macroeconomic impact of the changes in monetary policy frameworks and the fiscal support in the U.S. and euro area during the pandemic. Moving from a previous target of “below, but close to 2 percent” to a formal...

This paper provides evidence of the relationship between fiscal and monetary policy in Colombia through an empirical exploration of the credit risk channel. Under this empirical approach, fiscal policy serves as an important explanatory role in the sovereign risk premium which, in turn, could...