We argue that the fiscal policies adopted early in World War I by the U.K. were responsible for its poor economic performance during the interwar period. In September 1915, the U.K. embarked on a set of non-tax-smoothing policies collectively known as the McKenna rule. The key dictum of the...

In this paper, we revisit the effects of government spending shocks on private aggregate consumption within an estimated New-Keynesian DSGE model of the euro area featuring non-Ricardian households and a relatively detailed fiscal policy set up. Employing Bayesian inference methods, we show that...

In this paper we analyse the monetary impact of alternative fiscal policy rules using the debt and deficit, both mentioned as measures of fiscal policy performance in the Stability and Growth Pact (SGP). We use a New Keynesian model, with distortionary taxation and an appropriately defined...

Unstable government debt dynamics can typically be corrected by various fiscal instruments, like appropriate adjustments in government spending, public transfers, or taxes. This paper investigates properties of state-contingent debt targeting rules which link stabilizing budgetary adjustments...

In this paper, we report on the main building blocks of an ongoing project to develop a computational agent-based simulator for a generic real-time large-value interbank payment system with a central processor that can implement different rules for payment settlement. The main types of payment...

Over the years, optimal taxation has been extensively discussed, and a major focus has been on the question of whether the optimal capital income tax rate is zero in long-run equilibrium. This paper addresses this issue in the context of a model of vintage capital with technical change and the...

This paper shows how to use optimal control theory to derive time-consistent optimal government policies in nonlinear dynamic general equilibrium models. It extends the insight of Cohen and Michel (1988), who showed that in _linear_ models time-consistent policies can be found by imposing a...

In this paper, we use an open economy DGE model (SIGMA) to assess the quantitative effects of fiscal shocks on the trade balance in the United States. We examine the effects of two alternative fiscal shocks: a rise in government consumption, and a reduction in the labor income tax rate. Our...

Homestead exemption is defined as the level of home equity that a household declaring bankruptcy can keep. This exemption level varies across states in the United States. As entreprenurial activities are risky, small business owners value the insurance the bankruptcy law provides. In their...

We study monetary and fiscal policy games in a dynamic sticky priceeconomy where monetary policy sets nominal interest rates and fiscal policy provides public goods financed with distortionary labor taxes. We compare the Ramsey outcome to non-cooperative policy regimes where one or both...