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Optimal monetary and fiscal policy: a linear-quadratic approach

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Figure

Figure 1: Impulse response of the public debt to a pure fiscal shock, for alternative degrees of price stickiness.
Figure 2: Impulse response of the tax rate to a pure fiscal shock.
Figure 3: Impulse response of the inflation rate to a pure fiscal shock.
Table 1: Immediate responses for alternative degrees of price stickiness. κ T τ ˆ ∞ π 0 .024 29 .072 .021 .05 20 .076 .024 .10 14 .077 .030 .25 9 .078 .044 1.0 5.4 .075 .113 25 2.4 .032 .998 ∞ 0 0 1.651

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