This paper investigates the effects generated by limited asset market participation on optimal monetary and fiscal policy, where monetary and fiscal authorities are independent and play strategically. It shows that: (i) both the long run and the short run equilibrium require a departure from...

This paper analyzes the redistributive channel of a money financed fiscal stimulus (MFFS). It shows that the way in which this regime is implemented is crucial to determine its redistributive effects and consequently its effectiveness. In normal times, the most effective regime is a MFFS with no...

In the "perpetual youth" overlapping-generations model of Blanchard and Yaari, if leisure is a "normal" good then some agents will have negative labour supply. We suggest a solution to this problem by using a modified version of Greenwood, Hercowitz and Huffman's utility function. The...

Inflation depends on both monetary and fiscal policies and on how agents believe that these policies will evolve in the future. Can monetary policy control inflation, when both monetary and fiscal policies are allowed to change over time? To analyse this problem, we study a model in which both...

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 lumpsum taxation, effective in...