This paper studies the role of wealth effects in the monetary transmission mechanism in New Keynesian models. We propose a decomposition of consumption that extends the Slutsky equation to a general equilibrium setting. Wealth effects, and their amplification in general equilibrium, explain a...

This paper investigates the inflationary effects of fiscal policy in an optimising general equilibrium monetary model with capital accumulation, flexible prices and wealth effects. The model is calibrated to Euro Area quarterly data. Simulation results show that government deficits, high debt...