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Monetary Policy and Fiscal Rules

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Author Info
Barbara Annicchiarico (University of Rome 'Tor Vergata')
Giancarlo Marini (University of Rome 'Tor Vergata')
Alessandro Piergallini (University of Rome 'Tor Vergata' and CeFiMS, SOAS, University of London)

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Abstract

This paper presents a Dynamic New Keynesian model with wealth effects to study the performance of monetary policy under Ricardian and non-Ricardian fiscal regimes. The model is calibrated to euro area quarterly data. The interactions between fiscal policy and interest rate rules have critical implications for equilibrium uniqueness. Within the class of Ricardian fiscal rules, active monetary policies are not necessary for equilibrium determinacy. However, monetary authorities overreacting to inflation not only improve macroeconomic performance, but also generate similar outcomes under different fiscal rules. Conversely, under non-Ricardian fiscal regimes, interest rate pegs are predicted to reduce inflation variability.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Contributions to Macroeconomics.

Volume (Year): 8 (2008)
Issue (Month): 1 ()
Pages: 1357-1357
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Handle: RePEc:bep:maccon:v:8:y:2008:i:1:p:1357-1357

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Related research
Keywords: fiscal policy rules monetary policy wealth effects OLG

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marcela Meirelles-Aurelio, 2005. "The performance of monetary and fiscal rules in an open economy with imperfect capital mobility," Research Working Paper RWP 05-01, Federal Reserve Bank of Kansas City. [Downloadable!]
  2. Araújo, Eurilton, 2008. "Robust Monetary Policy with the Consumption-Wealth Channel," Ibmec Working Papers wpe_108, Ibmec Working Paper, Ibmec São Paulo. [Downloadable!]
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