We derive necessary and suffcient conditions for simple monetary policy rules that guarantee equilibrium determinacy in the New Keynesian monetary model. Our modeling framework is derived from a fully specified optimization model that is still amenable to analytical characterisation. The...

This paper analyzes the specific role of fiscal policy on the welfare effects of macroeconomic stabilization policies. We extend current DSGE models à la Schmitt-Grohè and Uribe (2003) to a non-tandard fiscal policy framework. We focus on distortionary and progressive taxation which alters the...

We study optimal monetary policy in a two-sector model. The conventional wisdom in the literature is that the monetary authority should optimally stabilize inflation in the sticky-price sector. We reassess this issue in a two sector economy with capital accumulation subject to adjustment costs....