This paper has two main objectives. The first is to propose a policy architecture that can prevent a very high public debt from resulting in a high tax burden, a government default, or inflation. The second objective is to show that government deficits do not face a financing problem. After...

Historically high levels of private and public debt coupled with already very low short-term interest rates appear to limit the options for stimulative monetary policy in many advanced economies today. One option that has not yet been considered is monetary financing by central banks to boost...

The importance of liquidity and insolvency for nation states and banks has been highlighted by current economic woes in the eurozone and elsewhere. The concepts are grounded in monetary theory, which determine the way they are interpreted. Connected to the discussion of autometallism and...

Does fiscal policy have qualitatively different effects on the economy in a liquidity trap? We analyze a nonlinear stochastic New Keynesian model and compare the true and loglinearized equilibria. Using the loglinearized equilibrium conditions, the answer to the above question is yes. However,...

We present strong empirical evidence favoring the role of effective demand in the US economy, in the spirit of Keynes and Kalecki. Our inference comes from a statistically well-specified VAR model constructed on a quarterly basis from 1980 to 2008. US output is our variable of interest, and it...

Not since the Great Depression have monetary policy matters and institutions weighed so heavily in commercial, financial, and political arenas. Apart from the eurozone crisis and global monetary policy issues, for nearly two years all else has counted for little more than noise on a relative...

Beyond its original mission to 'furnish an elastic currency' as lender of last resort and manager of the payments system, the Federal Reserve has always been responsible (along with the Treasury) for regulating and supervising member banks. After World War II, Congress directed the Fed to pursue...

The 1951 Treasury - Federal Reserve Accord is an important milestone in central bank history. It led to a lasting separation between monetary policy and the Treasury's debt-management powers, and established an independent central bank focused on price stability and macroeconomic stability. This...

Monetary and fiscal policy do not determine the stochastic path of prices: in the absence of financial policy, there remains indeterminacy indexed by an arbitrary probability measure over the set of states of the world. With an interest rate policy, and only if the asset market is complete,...

Emerging markets (EM) face their fifth consecutive year of slowing growth and a possibly longer period of sluggish performance than previously thought. This paper presents a comprehensive analysis of the nature of and the appropriate policy responses to the growth slowdown in EM. It reports...