In a DSGE model with non-ricardian agents, a' la Blanchard-Yaari, stock-price fluctuations affect the dynamics of aggregate consumption through wealth effects. This wealth effects can be characterized as an additional dynamic distortion with respect to the social planner allocation, related to...

An economy plagued by a slump and in a liquidity trap has some options to exit the crisis. We discuss "helicopter money" and other equivalent policies that can reflate the economy and boost consumption. In the framework analysed – where lump-sum transfers may be the only effective fiscal...

This paper shows that the result implied by the Redux model of Obstfeld and Rogoff (1995) - that the exchange rate depreciates in response to balanced-budget fiscal expansions - is completely reversed once we account for two key features of modern New Open Economy Macroeconomics models: home...

In this paper we investigate the role of macroeconomic stabilization policies for the international transmission of productivity shocks and their effects on the external sector. We develop a two-country stochastic Dynamic New-Keynesian 'perpetual youth' model of the business cycle with...

Contrary to widespread empirical evidence, standard NOEM models imply that the real exchange rate appreciates following an increase in public spending. This paper introduces productive government purchases and shows that the real exchange rate can depreciate after a positive spending shock, thus...