Yes, it makes a lot of sense. Using the Smets and Wouters (2007) model of the U.S. economy, we find that the role of the output gap should be equal to or even more important than that of inflation when designing a simple loss function to represent household welfare. Moreover, we document that a...

The paper analyzes the determinants of four fiscal trends, observed in many developed countries over the past 40 years: a decline in the corporate tax rate and public investment offset by an increase in the labour income tax and government consumption. Within a simple neoclassical growth model...

We analyze how public debt evolves when successive policymakers have different policy goals and cannot make credible commitments about their future policies. We consider several cases to be able to quantify the effects of imperfect commitment, political disagreement and political turnover....

debt is sensibly increasing in the degree of political disagreement. Lower degree of commitment drives debt toward zero, while the frequency of political turnover does not produce relevant effects.

Monetary policy objectives and targets are not necessarily constant over time. The regime‐switching literature has typically analyzed and interpreted changes in policymakers' behavior through simple interest rate rules. This paper analyzes policy regime switches by explicitly modeling...

This paper develops a model of optimal government debt maturity in which the government cannot issue state-contingent bonds and the government cannot commit to fiscal policy. In contrast to an environment with full commitment, there is a tradeoff between the cost of funding and the benefit of...

This paper develops a model of optimal government debt maturity in which the government cannot issue state-contingent bonds and cannot commit to fiscal policy. If the government can perfectly commit, it fully insulates the economy against government spending shocks by purchasing short-term...

Yes. Using the workhorse Smets and Wouters (2007) model of the U.S. economy, we find that the role of the output gap should be equal to or even more important than that of inflation when designing a simple loss function to represenst household welfare. Moreover, we document that a loss function...

We prove the generality of the methodology proposed in Benigno and Woodford (2006). We show that, even in the presence of a distorted steady state, it is always possible and relatively simple to obtain a purely quadratic approximation to the welfare measure. We also show that, in order to do so,...