To explain measures stabilization policy to a wide public, the results of complicated models have to be presented in an as-simple-as-possible framework This paper combines useful concepts for stabilization policy in a graphical presentation that displays any model that is able to produce an...

The need for macroprudential policy to “lean against the wind” of credit cycles at the aim of financial and hence macroeconomic stability is a common belief. Which design of macroprudential policy might attain the greatest stability for the economy is still an open debate. This paper builds...

This paper looks at theoretical and empirical issues associated with the operation of fiscal stabilizers within an economy. It argues that such stabilizers operate most effectively at a national, rather than local, level. As differing cycles across regions tend to offset each other for the...

It is widely assumed that a common currency makes it desirable to have also a common fiscal policy. However, if fiscal policy is a source of shocks, independent national fiscal policies are generally preferable because they allow for risk diversification

In this paper we introduce an application of the supply-side channel for fiscal policy to the basic New Keynesian model. We use a proportional tax rate instead of lump sum tax and introduce the distortions of a tax wedge. We derive a closed economy forward-looking model with government...

We propose an integrated treatment of the problems of optimal monetary and fiscal policy, for an economy in which prices are sticky (so that the supply-side effects of tax changes are more complex than in standard fiscal analyses) and the only available sources of government revenue are...

This paper examines the optimal response of monetary and fiscal policy to a decline in aggregate demand. The theoretical framework is a two-period general equilibrium model in which prices are sticky in the short run and flexible in the long run. Policy is evaluated by how well it raises the...

We study a model where monetary and fiscal policy share the task of stabilizing output and inflation, and the central bank has been assigned a mandate for the latter. The optimal fiscal policy does not imply assigning to the government a (symmetric) mandate to stabilize output. Instead, the...

We assess the role of national fiscal policies, as automatic stabilizers, within a monetary union. We use a two-country New Keynesian DGE model which incorporates non-Ricardian consumers (as in Gali et al. 2004) and a home bias in the composition of national consumption bundles. We find that...

This paper addresses the question of the joint conduct of fiscal and monetary policy in a currency union. The problem is studied using a two-country DSGE framework with staggered price setting, monopolistic competition in the goods market, distortionary taxation and nominal debt. The two...