Equilibrium Determinacy under Monetary and Fiscal Policies in an Overlapping Generations Model

This paper studies the issue of equilibrium determinacy under monetary and fiscal policy feedback rules in an optimizing general equilibrium model with overlapping generations and flexible prices. It is shown that equilibria may be determinate also when monetary and fiscal policies are both 'passive'. In particular, under passive monetary rules, equilibrium uniqueness is more likely to be verified when fiscal policies are less committed to public debt stabilization. Copyright Banca Monte dei Paschi di Siena SpA, 2005