This paper investigates the importance of fiscal policy in providing macroeconomic stabilisation in a monetary union. We use a microfounded New Keynesian model of a monetary union which incorporates persistence in inflation, and examine non-cooperative interactions of fiscal and monetary...

This paper investigates the importance of fiscal policy in providing macroeconomic stabilisation in a monetary union. We use a microfounded New Keynesian model of a monetary union which incorporates persistence in inflation and non-Ricardian consumers, and derive optimal simple rules for fiscal...

We present a crisis model which illustrates how oil price shocks led to the resulting collapse of the fixed exchange rate system in Russia. We discuss crucial weaknesses of the Russian economy and argue that the reason it was particularly vulnerable to shocks was that the government and the...