This paper develops a stochastic two-country "perpetual youth" Dynamic New Keynesian model of the international business cycle with incomplete international financial markets and stationary net foreign assets. The model allows for a thorough analysis of the interaction of endogenous monetary...

In the Argentine hyperinflations of 1989 and 1990, quasi-fiscal deficits were a major part of the problem. The Central Bank´s quasi-fiscal activities are financed directly by money printing but in some cases the monetary authority tries to sterilize the effect on the money supply by issuing...

Blanchard (2005) suggested that active interest rate policy might induce unstable dynamics in highly-indebted economies. We examine this in a dynamic general equilibrium model where Calvo-type price rigidities provide a rationale for inflation stabilization. Unstable dynamics can occur when the...