2005), “Analyzing the Interaction of Monetary and Fiscal Policy: Does Fiscal Policy Play a Valuable Role in Stabilisation?”, this issue

This paper provides an overview of recent papers which use estimated New Keynesian models to study the extent to which \u85scal policy can be used to stabilize the economy. We use a variety of di¤erent New Keynesian models, estimated on data for both the US and for the Euro area, and highlight the diverse transmission channels through which \u85scal policy acts in these mod-els. Although we \u85nd that \u85scal policy can provide a useful complement to monetary policy, especially in models where consumers have \u85nite horizons, there are important limitations to the value added of \u85scal policy