Wynne Godley and Hyman Minsky were two macroeconomists who ‘saw the crisis coming'. This paper develops a simple macrodynamic model that synthesises some key perspectives of their analytical frameworks. The model incorporates Godley's financial balances approach and postulates that private...

Governments can issue public debt for both good and bad reasons. The former include intertemporal tax smoothing, fiscal stimulus, and asset management. In contrast, the bad reasons, which generate higher indebtedness, are mainly associated with political cycles, rent capture, intergenerational...

This paper examines the implications of different monetary and fiscal policy rules in an economy characterized by Harrodian instability. We show that (i) a monetary rule along Taylor lines can be stabilizing for low debt ratios but becomes de-stabilizing if the debt ratio exceeds a certain...

The aim of our paper is to contribute to the debate on optimal fiscal rules in a monetary union: in terms of global budgetary deficit, of structural budgetary deficit, or of public debt. Indeed, these rules seem to be mixed in the framework of the European Economic and Monetary Union, with the...

We will study in this paper the relation between public investment, public debt and fiscal rules in the European Union countries. The strict fiscal rules imposed by EU have negatively affected the investments. The decline in public investment in European Union is related to the fiscal rules...

This paper deploys a simple stock-flow consistent (SFC) model in order to examine various contentions regarding fiscal and monetary policy. It follows from the model that if the fiscal stance is not set in the appropriate fashion that is, at a well-defined level and growth rate - then full...

How does the need to preserve government debt sustainability affect the optimal monetary and fiscal policy response to a liquidity trap? To provide an answer, we employ a small stochastic New Keynesian model with a zero bound on nominal interest rates and characterize optimal time-consistent...

This paper studies optimal discretionary monetary and fiscal policy when the lower bound on nominal interest rates is occasionally binding in a model with nominal rigidities and long-term government debt. At the lower bound it is optimal for the government to temporarily reduce debt. This...

Should a government have more than one fiscal rule constraining fiscal aggregates? If so, why? In this paper, we present a dynamic general equilibrium model of a small open economy featuring an incumbent government to assess how and why implementing a budget balance rule and a debt anchor rule...