New model predicts impact of fiscal policy on debt stabilization.
The article explores how fiscal and monetary policies interact in a two-country economic model with different types of households. The researchers focus on how fiscal policy can stabilize the debt-to-GDP ratio by setting specific targets. They use a simulation to analyze the effects of these policies on the economy, particularly in Brazil. The study corrects some previous model specifications and finds that fiscal policy can have significant implications in this type of economic model.