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...

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The goal of this paper is to probe the validity of the fiscal theory of the price level by modelling explicitly the market structure in which households and the government make their decisions. I describe the economy as a game, and I am thus able to state precisely the consequences of actions...

This paper builds a simple but complete model of a political system to analyze the effects of intergenerational conflicts on capital and labor income tax rates, transfers, and government spending. I show how the different nature of tax liabilities for the young and the old can explain why the...

We analyze a "golden rule" that separates capital and ordinary account budgets and allows a government to finance only capital items with debt. Many national governments followed this rule in the eighteenth and nineteenth centuries, and most U. S. states do today. We study an...

We analyze the democratic politics and competitive economics of a ‘golden rule’ that separates capital and ordinary account budgets and allows a government to issue debt to finance only capital items. Many national governments followed this rule in the 18th and 19th centuries and most U.S....

Many authorities at home and abroad questioned Italy's ability to meet the strict criteria to join the European Monetary Union. The author looks at the interaction between fiscal policy and monetary policy in Italy between 1992, when it exited the European Exchange Rate Mechanism, and 1998, when...