We investigate the optimal responses of policy authorities through a model where the fiscal and the monetary policymakers are independent and play strategically. We allow for the presence of two types of consumers: ‘Ricardians’, who trade in the assets market and ‘liquidity constrained’...

In the first chapter, first we review the famous Taylor (1979, 1980a) model of staggered wage setting and then we present original work in describing the structure of a dynamic general equilibrium model with staggered wage setting a la Taylor. This model is central to the thesis since the...