A framework is developed for macroeconomic policy analysis in four countries of Central Europe (CE) in transition to EU membership (Czech Republic, Hungary, Poland, and Slovakia). A Multi-Annual Fiscal Adjustment Strategy (MAFAS) and a Pre-Pegging Exchange Rate Regime (PPERR) appropriate for...

In this paper we survey the historical record for over two centuries on the connection between expansionary fiscal policy and inflation. As a backdrop, we briefly lay out several theoretical approaches to the effects of fiscal deficits on inflation: the earlier Keynesian and monetarist...

In the wake of the Lucas Critique, the study of appropriate macroeconomic policy has largely focused on the comparison of different regimes/rules. In practice, few policymakers are faced with making those kinds of choices. In this paper, I examine the problem of a policymaker making but one in a...

At a minimum, this paper should serve as a warning against too easy an acceptance of the view that the costs of sustained inflation are small relative to the costs of unemployment. If a temporary reduction in unemployment causes a permanent increase in inflation, the present value of the...

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...

We estimate a New-Keynesian macro model accommodating regime-switching behavior in monetary policy and in macro shocks. Key to our estimation strategy is the use of survey-based expectations for inflation and output. We identify accommodating monetary policy before 1980, with activist monetary...

Developing countries have typically pursued procyclical macroeconomic policies, which tend to amplify the underlying business cycle (the "when-it-rains-it-pours" phenomenon). There is, however, evidence to suggest that about a third of developing countries have shifted from procyclical to...

This paper advances the hypothesis that the world debt crisis was mainly induced by the dramatic rise of US interest rates in the first half of the eighties. It sees this rise in interest rates primarily as a result of a tight US monetary policy and excessively large investment incentives...