This paper studies the interactions of fiscal policy and monetary policy when they stabilize a single economy against shocks in a dynamic setting. If both policy-makers are benevolent, then, in our model, the best outcome is achieved when monetary policy does nearly all of the stabilization. If...

The COVID-19 crisis has caused the greatest collapse in global economic activity since 1720. Some advanced countries have mounted a massive fiscal response, both to pay for disease-fighting action and to preserve the incomes of firms and workers until the economic recovery is under way. But...