We analyze the effects of government spending in a New-Keynesian model with search and matching frictions featuring endogenous growth through learning-by-doing and skill loss from long-term unemployment. We show that medium-run and long-run output and unemployment multipliers are much larger...

This paper studies price stability and debt sustainability when the real rate exceeds trend growth (r g) in a New Keynesian model with endogenous technology growth through R&D. Under debt-stabilizing ("passive") fiscal policy the Taylor principle is not sufficient for determinacy. Instead,...

We analyze the interaction between committed monetary policy and discretionary fiscal policy in a model with public debt, endogenous government expenditures, distortive taxation and nominal rigidities. Fiscal decisions lack commitment but are Markovperfect. Monetary commitment to an interest...

I study the welfare performance of a policy regime of fiscal activism in which fiscal policy acts as an automatic stabilizer and controls inflation, while monetary policy pegs the nominal interest rate. When evaluated through the lens of a standard New Keynesian model, accounting for price and...

This paper studies the impact of the state-dependent risk of a government default on the correlation of the scal balance and current account. We use a small open economy model where nonlinear risk premia arise endogenously when the government operates close to its scal limit, i.e. the maximum...