Several papers have documented a regime switch in US monetary policy from ‘passive’ and destabilizing in the pre-1979 period to ‘active’ and stabilizing afterwards. These studies typically work with DSGE models with rational expectations. This paper relaxes the assumption of rational expectations and allows for learning instead. Economic agents form expectations from simple models and update th...

This paper examines how the scale and composition of public debt can affect economies that implement a combination of “passive” monetary policy and “active” fiscal policy. This policy configuration is argued to be of both historical and contemporary interest in the cases of the U.S. and Japanese economies. It is shown that higher average levels and moderate average maturities of debt can induce...

Macroeconomic theories picture the economy as a phenomenon tractable by their analysis and thus manageable macroeconomic policies guided this analysis. This approach has withstood recurrent policy failures, competing several changes of paradigms, from Keynesianism to monetarism, because development economics discipline been entangled with demand policymakers receive clear prescriptions expert c...

This article explores the controversial subject of Eurobonds, by analyzing their economic consequences in an asymmetric monetary union like Eurozone, where countries differ size and policy preferences. We thus build a two-country DSGE model to compare three scenarios government debt issuance: i) issue own sovereign bonds (the baseline scenario is given label “National bonds”); ii) common withou...

Monetary environment as the core of financial system has been functionally designed in light of the new set of extensive goals including financial stability, sustainable noninflationary growth, external sustainability, and price stability. A comprehensive monetary policy framework is proposed for Iran which systematically include the new goals, stance variables, instruments, transmission mechan...

This paper analyses the macroeconomic content of 15 PRSPs from a growth and poverty reduction perspective. It finds that, in the main and contrary to new trends in developed and middle income countries, their macroeconomic policy frameworks lack the necessary flexibility to deal with external shocks and to appropriately address macroeconomic volatility. To ilustrate the point, their fiscal and ...

This paper develops a computable general equilibrium model with overlapping generations [OLG] to analyse the behavioural, welfare and macroeconomic implications of the following hypothetical changes to the age pension means test: (i) abolition of the means test, (ii) 50 percent reduction in the income taper rate and (iii) removal of the labour earnings from the income test. The model features i...

Initial announcements of macroeconomic indicators are based on imprecise and incomplete information. Government statistical agencies routinely restate the initial estimates over the course of several subsequent years as more information becomes available. We find that simple accounting-based aggregates, such as earnings dispersion, can predict future restatements in macroeconomic estimates, inc...

The literature on costs of financial instability tends to focus on fiscal costs and the impact on GDP of banking crises. In this paper we analyse the effect of a banking or currency crisis on consumption. We show that consumption plays an important role in the macroeconomic adjustment following a financial crisis. Furthermore, the effect of a crisis is aggravated by high leverage, notably as sh...