Optimal Fiscal Policy With Oil Revenues

optimal fiscal policy with oil revenues

Optimal Fiscal and Monetary Policy

We study optimal fiscal and monetary policy in an environment where explicit frictions give rise to valued money, making money essential in the sense that it expands the set of feasible trades. Our main results are in stark contrast to the prescriptions of earlier flexible-price Ramsey models. The two most important findings that emerge from our work are that the Friedman Rule is typically not ...

Optimal Fiscal Policy in Dynamic Models

Optimal Fiscal and Monetary Policy: Equivalence Results

In this paper, we analyze the implications of price setting restrictions for the conduct of cyclical fiscal and monetary policy. We consider standard monetary economies that differ in the price setting restrictions imposed on the firms. We show that independently of the degree or type of price stickiness it is possible to implement the same efficient set of allocations, and that each allocation...

Optimal Fiscal Policy in Debt Constrained Economies∗

We study optimal fiscal policy in a small open economy (SOE) with sovereign default risk. The SOE’s government uses linear taxation to fund exogenous expenditures and uses public debt to inter-temporally allocate tax distortions. We characterize a class of environments in which the tax on labor goes to zero in the long run, while the tax on capital income may be non-zero, reversing the standard...

Optimal fiscal and monetary policy without commitment∗

This paper studies optimal fiscal and monetary policy in a stochastic economy with imperfectly competitive product markets and a discretionary government. We find that, in the flexible price economy, optimal time-consistent policy implements the Friedman rule independently of the degree of imperfect competition. This result is in contrast to the Ramsey literature, where the Friedman rule emerge...