This paper considers monetary and fiscal policy responses to oil price shocks in low income oil importing countries. I examine the dynamic properties and the welfare implications of a set of inflation targeting policies and a group of policies where the government provides a subsidy on household...

This essay aims to explain the nature of monetary and fiscal policy interactions and how those interactions could inform the fiscal rules that countries choose to follow. It makes two points: (1) monetary policy control of inflation requires appropriate fiscal backing; (2) European fiscal...