This paper analyzes jointly optimal fiscal and monetary policies in a small open economy with capital and sticky prices. We allow for trade in consumption goods under perfect international risk sharing. We consider balanced-budget fiscal policies where authorities use distortionary taxes on...

This paper analyzes jointly optimal fiscal and monetary policies in a small open economy with capital and sticky prices. We allow for trade in consumption goods under perfect international risk sharing. We consider balanced-budget fiscal policies where authorities use distortionary taxes on...

This paper investigates the importance of ?scal policy in providing macroeconomic stabilisation in a monetary union. We use a microfounded New Keynesian model of a monetary union which incorporates persistence in in?ation and non-Ricardian consumers, and derive optimal simple rules for ?scal...