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Due to time-inconsistency or political turnover, policymakers' promises are not always fulfilled. We analyze an optimal fiscal policy problem where the plans made by the benevolent government are periodically revised. In this loose commitment setting, the properties of labor and capital income taxes are significantly different than under the full-commitment(More)
Using a Markov-switching Bayesian likelihood approach, the paper proposes a new measure of the degree of credibility of the Federal Reserve. We estimate a medium-scale macroeconomic model, where the central bank has access to a commitment technology, but where a regime-switching process governs occasional re-optimizations of announced plans. The framework(More)
I build a dynamic stochastic general equilibrium model with search and matching frictions and two sectors in order to study the labour market effects of public sector employment and wages. Public sector wages plays an important role in achieving the efficient allocation. High wages induce too many unemployed to queue for public sector jobs, while if they(More)
This paper analyzes how public debt evolves when successive policymak-ers have different policy goals and cannot make credible commitments about their future policies. We consider several cases to be able to disentangle and quantify the respective effects of imperfect commitment and political disagreement. Absent political turnover, imperfect commitment(More)
NOTE: International Finance Discussion Papers are preliminary materials circulated to stimulate discussion and critical comment. References in publications to International Finance Discussion Papers (other than an acknowledgement that the writer has had access to unpublished material) Abstract This paper proposes a method and a toolkit for solving optimal(More)
  • José Dorich, Jason Allen, +19 authors Alexander Ueberfeldt
  • 2007
Bank of Canada working papers are theoretical or empirical works-in-progress on subjects in economics and finance. The views expressed in this paper are those of the author. No responsibility for them should be attributed to the Bank of Canada. Abstract I present a structural econometric analysis supporting the hypothesis that money is still relevant for(More)