Lukkezen, Jasper; Teulings, Coen N - C.E.P.R. Discussion Papers - 2013
This paper derives and estimates rules for fiscal policy that prescribe the optimal response to changes in unemployment … rule demands an immediate and large policy response that is procyclical to growth shocks and countercyclical to … analytic solutions for optimal policy. The variables in our reducedform model – growth, unemployment, primary surplus – have a …