Theory suggests that government should as far as possible smooth taxes and its recurrent consumption spending, which means that government debt should act as a shock absorber, and any planned adjustments in debt should be gradual. This suggests that operational targets for governments (e.g. for...

Theory suggests that government should as far as possible smooth taxes and its recurrent consumption spending, which means that government debt should act as a shock absorber, and any planned adjustments in debt should be gradual. This suggests that operational targets for governments (e.g. for...

Microfounded macromodels (SDGE models) represent the dominant approach in academic macroeconomics, and their influence now extends to the forecasting models of central banks.  These models appear to adopt a clear methodological approach, which promotes internal consistency above external...

Recent attempts to incorporate optimal fiscal policy into New Keynesian models subject to nominal inertia, have tended to assume that policy makers are benevolent and have access to a commitment technology.  A separate literature, on the New Political Economy, has focused on real economies...

Little is known about the possible impact of an influenza pandemic on a nation's economy.  We applied the UK macroeconomic model 'COMPACT' to epidemiological data on previous UK influenza pandemics, and extrapolated a sensitivity analysis to cover more extreme disease scenarios.  Analysis...

We consider optimal monetary and fiscal policies in a New Keynesian model of a small open economy with sticky prices and wages.  In this benchmark setting monetary policy is all we need - analytical results demonstrate that variations in government spending should play no role in the...

We examine the impact of different degrees of fiscal feedback on debt in an economy with nominal rigidities where monetary policy is optimal. We look at the extent to which different degrees of fiscal feedback enhances or detracts from the ability of the monetary authorities to stabilise output...