This paper examines the implications of different monetary and fiscal policy rules in an economy characterized by Harrodian instability. We show that (i) a monetary rule along Taylor lines can be stabilizing for low debt ratios but becomes de-stabilizing if the debt ratio exceeds a certain...

This paper examines the fiscal requirements for continuous full employment. We find that (i) changes in the financial behavior of households and firms require adjustments in tax rates and public debt, (ii) the stability of the steady-growth solution for public debt depends on the fiscal...

This paper examines the fiscal requirements for continuous full employment. We find that (i) changes in the financial behavior of households and firms require adjustments in tax rates and public debt, (ii) the stability of the steady-state solution for public debt depends on the fiscal...

Fiscal policy is needed to avoid dynamic inefficiency and maintain full employment in a modified Diamond OLG model with imperfect competition. A distributionally neutral tax scheme can maintain full employment in the face of variations in household confidence. No variations in taxes will be...

This paper examines the implications of different monetary and fiscal policy rules in an economy characterized by Harrodian instability. We show that (i) a monetary rule along Taylor lines can be stabilizing for low debt ratios but becomes de-stabilizing if the debt ratio exceeds a certain...