In this paper we contribute to the literature on environments with active fiscal and accommodating monetary policy. We show that this framework is able to explain the positive relationship between the steady state level of inflation and business cycle inflation volatility observable in the data....

Like the gold standard, price level targeting (PT) involves not letting past deviations of inflation be bygones; both regimes return the price level (or price of gold) to its target. The experience of suspension of the gold standard in World War I, resumption in the 1920s (for some countries at...

We merge a financial market model with leverage-constrained, heterogeneous agents with a reduced-form version of the New-Keynesian standard model. Agents in both submodels are assumed to be boundedly rational. The financial market model produces endogenously arising boom-bust cycles. It is also...

This paper investigates how volatile the general price level can be in an equilibrium where all uncertainty is extrinsic. The government operates a lump-sum redistribution policy using fiat money. An approach to modeling asset market segmentation is introduced in which this tax policy determines...

This paper examines the impact monetary redistribution policies have on the amount of sunspot-induced volatility in an economy. A dynamic model of segmented asset markets is presented in which the tax-transfer policy determines, in a continuous way, the influence sunspots can have on the general...

Previous studies have shown that, under certain conditions, a central bank could achieve a better trade-off between inflation and output volatility by replacing its inflation target with a price-level target. This paper studies whether a Taylor rule that targets the price-level instead of the...

The implementation of economic reforms under new economic policies in India was associated with a paradigmatic shift in monetary and fiscal policy. While monetary policies were solely aimed at "price stability" in the neoliberal regime, fiscal policies were characterized by the objective of...

The implementation of economic reforms under new economic policies in India was associated with a paradigmatic shift in monetary and fiscal policy. While monetary policies were solely aimed at “price stability” in the neoliberal regime, fiscal policies were characterized by the objective of...

This paper introduces an empirical measure of the cost of allocating money market volatility between the money stock and the Federal funds rate, the principal purpose being to devise a framework for data-based measures of the short-run implied by alternative operating procedures

Like the gold standard, price level targeting (PT) involves not letting past deviations of inflation be bygones; both regimes return the price level (or price of gold) to its target. The experience of suspension of the gold standard in World War I, resumption in the 1920s (for some countries at...