Discretionary policymakers cannot manage private-sector expectations and cannot coordinate the actions of future policymakers. As a consequence, expectations traps and coordination failures can occur and multiple equilibria can arise. In order to utilize the explanatory power of models with...

The last few years papers have begun to analyse optimal monetary and fiscal policy in models incorporating nominal rigidities where social welfare is derived from the utility of agents. This paper examines whether this analysis provides support for the consensus assignment, where monetary policy...

This paper investigates the stabilization bias that arises in a model of monetary and fiscal policy stabilization of the economy, when assuming that the monetary authority put higher weight on inflation stabilization than society. We demonstrate that inflation-conservatism unambiguously leads to...

This paper investigates stability in a small open economy under fixed exchange rates when a proportion of consumers are credit constrained, and there exists some degree of inflation inertia. We show that the combination of these two elements may generate significant cyclical behaviour, and that...

We consider monetary and fiscal policy interactions in a New-Keynesian model of a closed economy with a government solvency constraint. We study the problem of optimal delegation in the discretionary game with two optimising policymakers and provide a welfare ranking of different leadership...

In a monetary union where fiscal authorities act strategically fiscal cooperation is unlikely to emerge as an equilibrium. Even when the cooperative outcome is the best for a national fiscal authority, it is either not a Nash equilibrium, or only one of several Nash equilibria. The monetary...