Theory suggests that government should as far as possible smooth taxes and its recurrent consumption spending, which means that government debts should act as a shock absorber, and any planned adjustments in debt should be gradual.  This suggests that operational targets for governments (e.g....

Fiscal councils now exist in a number of countries.  This paper first considers the extent of deficit bias, potential explanations for it, and how independent institutions could help reduce it.  Are fiscal councils complements to or substitutes for fiscal rules, and why do none at  present...

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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...

Most recent work deriving optimal monetary policy utilising New Neo-Classical Synthesis (NNCS) models abstract from the impact of monetary policy on the government`s finances, by assuming that any change in the government`s budget can be financed through lump sum taxes. In this paper, we assume...

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...

The last few years papers have begun to analyse optimal monetary and fiscal policy in models incorporating nominal rigidities where social welfare is derived from the utility of agents. This paper examines whether this analysis provides support for the consensus assignment, where monetary policy...

The apparent success of independent central banks in conducting monetary policy has led many to argue that some form of policy delegation should also be applied to the macroeconomic aspects of fiscal policy. A number of countries have recently established Fiscal Councils, although their role is...