We propose an integrated treatment of the problems of optimal monetary and fiscal policy, for an economy in which prices are sticky and the only available sources of government revenue are distorting taxes. Our linear-quadratic approach allows us to nest both conventional analyses of optimal...

Recently there has been a resurgence of interest in the study of optimal monetary policy under uncertainty. This book provides a thorough survey of the literature that has resulted from this renewed interest. The authors ground recent contributions on the 'science of monetary policy' in the...

Contents: Preface -- Part I: Imperfect information, responses to shocks, and credibility issues -- 1. Introduction, Part 1 -- 2. A basic model and some early results -- 3. The strategy of monetary policy: Targets, instruments and information variables -- 4. A variable price level, supply shocks...

We present the first necessary and sufficient conditions for there to be a unique perfect-foresight solution to an otherwise linear dynamic model with occasionally binding constraints, given a fixed terminal condition. We derive further results on the existence of a solution in the presence of...

The efficacy of the widely-adopted “top-n” policy in university integration has been questioned because students strategically relocate to low-achieving high schools. We show that when different SES groups have heterogenous relocation costs, the policy can even segregate minorities from the...

Recent experience with interest rates hitting the effective lower bound and agents facing binding borrowing constraints has emphasised the importance of understanding the behaviour of an economy in which some variables may be restricted at times. The extended path algorithm is a commonly used...