Ramsey models of fiscal and monetary policy with perfectly-competitive product markets and a fixed supply of capital predict highly volatile inflation with no serial correlation. In this paper, we show that an otherwise-standard Ramsey model that incorporates capital accumulation and habit...

Many countries have large employment shares in micro and small firms that have limited access to formal financing and therefore rely on input credit. Such countries are mainly emerging and developing economies, whose business cycle dynamics are increasingly important for the global economy in...