We show that the effectiveness of redistribution policy is tied to how much inflation it generates, and thereby, monetary-fiscal adjustments ultimately finance transfers. In monetary regime, taxes increase transfers while in fiscal rises, imposing on public debt holders. analytically regime generates larger more persistent than regime. a two-sector model, we quantify effects CARES Act COVID rec...

This paper tests various political business cycle theories in a New Keynesian model with a monetary and fiscal policy mix. All the policy coefficients, the target levels of inflation and the budget deficit, the firms’ frequency of price setting, and the standard deviations of the structural shocks are allowed to depend on ‘‘political’’ regimes: a preelection versus postelection regime, a regime...

In this paper, the government consumption spending effects in a small open economy(SOE), are explored. In a standard active monetary/passive fiscal policy(AM/PF) regime, openness reduces the effectiveness of the government spending on output through the terms of trade decrease. Consumption decreases less than in the closed economy, but this effect is so weak that the output does not rise more t...

Announcements of future government spending have different effects on economic activity depending the monetary-fiscal policy mix. Upon announcement, they are contractionary in monetary regime but expansionary fiscal regime, contrast with nature at implementation both regimes. Anticipation can therefore help empirically distinguish between two Data support our theoretical insight, reconciling co...

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...