The paper models strategic monetary-fiscal interactions in the aftermath of the global financial crisis - in a single country as well as a monetary union. It depicts both the short- term (stabilization) perspective and the long-term (sustainability) perspective, and the link between them. This...

The paper models strategic monetary-fiscal interactions in the aftermath of the global financial crisis - in a single country as well as a monetary union. It depicts both the short- term (stabilization) perspective and the long-term (sustainability) perspective, and the link between them. This...

This paper proposes a simple framework that generalizes the timing structure of macroeconomic (as well as other) games. Building on alternative move games and models of "rational inattention" the players' actions may be rigid, ie optimally chosen to be infrequent. This rigidity makes the game...

Opponents of inflation targeting have argued that a commitment to a numerical inflation target reduces policy's stabilization flexibility - increasing output volatility under supply shocks. Using a novel game theoretic approach our paper demonstrates that this claim may fail to account for the...

Monetary and fiscal policies interact in many ways. Recently, the stance of fiscal policy in a number of countries (including the EU and the US) has raised concerns about risks for the outcomes of monetary policy. Our paper first shows that these concerns are justified since - under an ambitious...

This paper generalizes and qualifies an influential monetary policy result due to Rogoff (1985) by taking fiscal policy, and fiscal-monetary interactions, into account. It shows that an appointment of a conservative central banker may, under a range of circum- stances, (i) increase the average...

The fiscal position of many countries is worrying - and getting worse. Should formally independent central bankers be concerned that observed fiscal excesses spill over to monetary policy, and jeopardize price stability? To provide some insights this paper tracks the interactions between fiscal...

The paper examines whether central banks should be committed to achieving price stability (a low-inflation target), and how strong (explicit) their long-term monetary commitment should be. For that purpose we propose a game theoretic framework that enables us to model various degrees of...

Empirical literature provided convincing evidence that explicit (ie legislated) inflation targets anchor expectations. We propose a novel game theoretic framework with generalized timing that allows us to formally capture this beneficial anchoring effect. Using the framework we identify several...

The paper attempts to assess to what extent the central bank or the government should respond to developments that cause ?financial instability, such as housing or asset bubbles, overextended fi?scal policies, or excessive public or household debt. To analyze this question we set up a simple...