We investigate both the rational explosive inflation paths studied by McCallum (2001) and the classification of fiscal … for which the fiscal theory solution - in which fiscal variables affect the price level - can be a stable outcome under …

In this paper we consider inflation and government debt dynamics when monetary policy employs a global interest rate … interest rate rules are known to imply the existence of a second, low inflation steady state, below the target inflation rate … inflation steady state and is driven to an even lower inflation floor which, in turn, is supported by a switch to an aggressive …