We review the role of the central bank's (CB) balance sheet in a textbook monetary model, and explore what changes if the central bank is allowed to pay interest on its liabilities. When the central bank cannot pay interest, away from the zero lower bound its (real) balance sheet is limited by...

This paper compares business cycle fluctuations in hours worked by households with substantial capital income and without any capital income. We find that hours worked by households at the 95th percentile of the capital-labor income ratio, or "high-saving hours worked," have a significantly...

Economists have emphasized the importance of “creative destruction” as an engine of growth. The creative destruction process involves a constant reorganization of the economy as old products, firms, factories, and jobs are replaced by new ones. An important part of this process lies in the...

In Bassetto with Sargent (2004) and Bassetto and Lepetyuk (2007), I developed a model that can be used to quantitatively assess the consequences of departures from Ricardian equivalence on the mix of public goods provided by the government. Those papers assume that mobility is exogenous and that...

We analyze a new class of equilibria that emerges when a central bank conducts monetary policy by setting an interest rate (as an arbitrary function of its available information) and letting the private sector set the quantity traded. These equilibria involve a run on the central bank's interest...

This paper considers an optimal taxation environment where household income is private information, and the government randomly audits and punishes households found to be underreporting. We prove that the optimal mechanism derived using standard mechanism design techniques has a bad equilibrium...

The authors analyze whether it makes sense to treat public investment spending differently from other government spending when applying the deficit constraints mandated within the single European currency area. Given the low rates of population growth, mobility, and mortality in European...

We analyze the democratic politics of a rule that separates capital and ordinary account budgets and allows the government to issue debt to finance capital items only. Many national governments followed this rule in the 18th and 19th centuries and most U.S. states do today. This simple 1800s...

We study a simple model of production, accumulation, and redistribution, where agents are heterogeneous in their initial wealth, and a sequence of redistributive tax rates is voted upon. Though the policy is infinite-dimensional, we prove that a median voter theorem holds if households have...