This paper studies optimal monetary and fiscal policies in an economy à la Lucas and Stokey (1983) and Lagos and Wright (2005) with multiple cash and credit goods. We show that optimal policies are in general time inconsistent due to insufficient number of instruments to influence future...

The analysis provides a new explanation for two widespread problems concerning European unemployment policy: the disappointingly small effect of many past reform measures on unemployment, and the political difficulties in implementing more extensive reform programs. We argue that the heart of...

The Ramsey approach to optimal taxation and Ramsey tax rules have amassed substance in economic theory. However, they are often criticized on grounds of practicality, fairness, feasibility and some other aspects of designing actual tax policy. This paper presents a collection of these views; it...

This paper studies the optimal management of the maturity of government debt in an economy without commitment. We consider a reputation where any deviation triggers reversion to the worst sustainable equilibrium. We obtain two results. First, contrary to earlier literature, we show that a very...

This paper explores the optimal risk sharing arrangement between generations in an overlapping generations model with endogenous growth. We allow for nonseparable preferences, paying particular attention to the risk aversion of the old as well as overall 'life-cycle' risk aversion. We provide a...

The contemporary version of the dynamic Ramsey problem omits expectations of a household’s initial lump-sum wealth taxation due to policy revision; therefore, the attainable resource allocation set in this problem is ill-defined. This omission leads to misleading conclusions about the optimal...

For many kinds of capital, depreciation rates change systematically with the age of the capital. Consider an example that captures essential aspects of human capital, both regarding its accumulation and its depreciation: a worker obtains knowledge in period 0, then uses this knowledge in...

The analysis provides a new explanation for two widespread problems concerning European unemployment policy: the Disappointingly small effect of many past reform measures on unemployment, and the political difficulties in implementing more extensive reform programs.

We study optimal income taxation and public debt policy in a neoclassical economy populated by infinitely-lived households and a benevolent government. The government makes sequential decisions on the provision of a valued public good, on income taxation and the issue of public debt. We...

We find that the contemporary version of the dynamic Ramsey problem omits one important variable that we take into consideration in this paper. The effect of introducing of this variable into the analysis of dynamic inconsistency is similar to that of introducing expected inflation into the...