We examine the impact of different degrees of fiscal feedback on debt in an economy with nominal rigidities where monetary policy is optimal. We look at the extent to which different degrees of fiscal feedback enhances or detracts from the ability of the monetary authorities to stabilise output...

Most of the literature estimating DSGE models for monetary policy analysis assume that policy follows a simple rule. In this paper we allow policy to be described by various forms of optimal policy - commitment, discretion and quasi-commitment. We find that, even after allowing for Markov...

We study discretionary equilibria in dynamic linear-quadratic rational expectations models. In contrast to the assumptions that pervade this literature we show that these models do have multiple equilibria in some situations. We investigate general properties of discretionary equilibria. We...

This paper identifies leadership regimes in monetary-fiscal policy interactions in three countries, the UK, the US and Sweden. We specify a small-scale, structural general equilibrium model of an open economy and estimate it using Bayesian methods. We assume that the authorities can act...

We study the existence and uniqueness properties of monetary policy with limited commitment in LQ RE models. We use a New Keynesian model with debt accumulation in the spirit of Leeper (1991) as a `lab', because this model generates multiple equilibria under pure discretion, and under full...

Discretionary policymakers cannot manage private-sector expectations and cannot co- ordinate the actions of future policymakers. As a consequence, expectations traps and coordination failures can occur and multiple equilibria can arise. In order to utilize the explanatory power of models with...