Nominal rigidities equilibria in a non-Ricardian economy

Debt Stabilization in a Non-Ricardian Economy

In models with a representative infinitely lived household, modern versions of tax smoothing imply that the steady-state of government debt should follow a random walk. This is unlikely to be the case in OLG economies, where, the equilibrium interest rate may differ from the policy-maker’s rate of time preference such that it may be optimal to reduce debt today to reduce distortionary taxation ...

Nominal Price Rigidities in a Multisector Model

This paper uses a multisector sticky price model with cash-in-advance constraint to examine the implications of sectoral nominal price rigidities for the cyclical behavior of sectoral and aggregate movements in prices and output. The data suggest that correlations between sectoral output and price changes are substantially lower than would be implied by a flexible price model with sectoral tech...

A Tax-Based Test for Nominal Rigidities

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Introducing nominal rigidities. A static model

Optimal Fiscal Feedback on Debt in an Economy with Nominal Rigidities

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 and inflation. Using an objective function derived from utility, we find the optimal level of fiscal ...