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We show that even when the exchange rate cannot be devalued, a small set of conventional fiscal instruments can robustly replicate the real allocations attained under a nominal exchange rate devaluation in a dynamic New Keynesian open economy environment. We perform the analysis under...
Persistent link: https://www.econbiz.de/10013117401
The paper considers the implications of the rational expectations - New Classical Macroeconomics revolution for the "rules versus discretion" debate. The following issues are covered 1) The ineffectiveness of anticipated stabilization policy, 2) Non-causal models and rational expectations, 3)...
Persistent link: https://www.econbiz.de/10013104026
This paper analyzes the effects of monetary and fiscal policy shocks on the term structure of interest rates. The effects of temporary versus permanent, unanticipated versus anticipated, policy disturbances and the responses of long versus short, and real versus nominal, rates are contrasted....
Persistent link: https://www.econbiz.de/10012787473
The paper considers the implications of the rational expectations New Classical Macroeconomics revolution for the 'rules versus discretion' debate. The following issues are covered: 1) The ineffectiveness of anticipated stabilization policy, 2) Non-clausal models and rational expectations, 3)...
Persistent link: https://www.econbiz.de/10012760072
A significant source of risk arises from uncertainty concerning future government policy. Government action - - tax reform, deregulation, judicial decisions, budgetary shifts - - produces gains and losses for those who invested under preexisting rules. The effects of government relief - -...
Persistent link: https://www.econbiz.de/10012760199
The paper considers the implications of the rational expectations New Classical Macroeconomics revolution for the 'rules versus discretion' debate. The following issues are covered: 1) The ineffectiveness of anticipated stabilization policy, 2) Non-clausal models and rational expectations, 3)...
Persistent link: https://www.econbiz.de/10012763179
We consider a model in which the level of taxes and seignorage are too low to finance government expenditures and debt service. Government debt will therefore grow without bound, implying the eventual need to change policy. Starting with utility maximization, we analyze the effect of the...
Persistent link: https://www.econbiz.de/10013221975
The paper examines international issues that arise in the design and evaluation of macroeconomic policy rules. It begins with a theoretical investigation of the effects of fiscal and monetary policy in a two-country rational expectations model with staggered wage and price setting and with...
Persistent link: https://www.econbiz.de/10013247284
This paper surveys the recent literature on the theory of macroeconomic policy. We study the effect of various incentive constraints on the policy making process, such as lack of credibility, political opportunism, political ideology, and divided government. The survey is organized in three...
Persistent link: https://www.econbiz.de/10013323999
Aging populations in advanced economies are placing ever-increasing demands on government spending in the form of old-age benefits. Economies that have promised substantially more benefits than they have made provision to finance are heading into a prolonged era of fiscal stress. Unresolved...
Persistent link: https://www.econbiz.de/10013129132