This paper evaluates the effects of optimal Ramsey rules for government expenditure (investment in physical and human capital) and revenue (taxes on labor and capital income) on welfare, debt stabilization, output and factor shares. The real macroeconomic model is calibrated and estimated to...

This paper investigates the macroeconomic risks associated with undesirably low inflation using a medium-sized New Keynesian model. We consider different causes of persistently low inflation, including a downward shift in long-run inflation expectations, a fall in nominal wage growth, and a...

Wages have been rising faster than productivity in many European countries for the past few years, yet signs of underlying consumer price pressures remain limited. To shed light on this puzzle, this paper examines the historical link between wage growth and inflation in Europe and factors that...