New Keynesian models rely heavily on two workhorse models of nominal inertia - price contracts of random duration Calvo (1983) and price adjustment costs Rotemberg (1982) - to generate a meaningful role for monetary policy. These alternative descriptions of price stickiness are often used...

We develop the theory of price-level determination in a range of models using both ad hoc policy rules and jointly optimal monetary and fiscal policies and discuss empirical issues that arise when trying to identify monetary-fiscal regime. The article concludes with directions in which...

The textbook optimal policy response to an increase in government debt is simple--monetary policy should actively target inflation, and fiscal policy should smooth taxes while ensuring debt sustainability. Such policy prescriptions presuppose an ability to commit. Without that ability, the...

The paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition - either tax- or spending-based - are uncertain. We find that the composition of the fiscal consolidation, its duration, the monetary policy stance, the level of government debt, and...