This paper investigates the in inflationary effects of fscal policy in an optimizing general equilibrium monetary model with capital accumulation, exible prices and wealth effects. The model is calibrated to Euro Area quarterly data. Simulation results show that government defcits, high debt...

Price level targeting has been proposed as an alternative to inflation targeting that may confer benefits if a central bank sets policy under discretion, even if societyu0092s loss function is specified in terms of inflation (instead of price level) volatility. This paper demonstrates the...

The behaviour of the exchange rate under a floating exchange rate regime for a small open economy with perfect capital mobility may appear like a managed float or even a firmer peg. We present a canonical new neo-classical synthesis open economy model where the central bank follows a strategy...