Recent work on optimal monetary and fiscal policy in New Keynesian models suggests that it is optimal to allow steady-state debt to follow a random walk. Leith and Wren-Lewis (2012) consider the nature of the timeinconsistency involved in such a policy and its implication for discretionary...

In March 2013 around 130 participants from academia, banking and finance, governments and central banking gathered at the premises of the OeNB in Vienna for a conference jointly organized by the European Money and Finance Forum SUERF, the OeNB and the Austrian Society for Bank Research to...

Recent attempts to incorporate optimal fiscal policy into New Keynesian models subject to nominal inertia, have tended to assume that policy makers are benevolent and have access to a commitment technology. A separate literature, on the New Political Economy, has focused on real economies where...

Recent attempts to incorporate optimal fiscal policy into New Keynesian models subject to nominal inertia, have tended to assume that policy makers are benevolent and have access to a commitment technology.  A separate literature, on the New Political Economy, has focused on real economies...

In this paper we propose an index of the fiscal stance suitable for practical use in short-term policy making. The index is based on a comparison of a target level of the debt-GDP ratio for a given finite horizon with a forecast of the debt-GDP ratio based on a VAR formed from the government...

We construct a staggered-price dynamic general equilibrium model with overlapping generations based on uncertain lifetimes. Price stickiness plus lack of Ricardian Equivalence could be expected to make an increase in government debt, with associated changes in lump-sum taxation, effective in...

We provide a systematic analysis of fiscal consolidation in a medium-scale dynamic general equilibrium model. Our results show that the choice of the consolidation instrument is very important, not only with respect to the short- and long-run output effects of the different consolidation...

Household-specific growth rates of the tax base imply that the timing of tax collections determines the distribution of tax burdens and wealth across households. Changes in fiscal policy do not only shift tax burdens across generations, but also within cohorts. Institutional deficit constraints...

We propose an index of the fiscal stance that is convenient for practical use. It is based on a finite time horizon, not on an infinite time horizon like most tests. As it employs VAR analysis it is simple to compute and easily automated. We also show how it is possible to analyse a change of...

In the absence of government commitment, the conduct of fiscal and monetary policy depends on the sign of inherited net nominal government obligations. When these obligations are negative, monetary policy is non-distortionary and fiscal policy distortions are smoothed over time, either forever...