Monetary and Fiscal Policy Interaction: The Current Consensus Assignment in the Light of Recent Developments
AbstractIn the last few years papers have begun to analyse optimal monetary and fiscal policy in models incorporating nominal rigidities where social welfare is derived from the utility of agents. This article examines whether this analysis provides support for the consensus assignment, where monetary policy controls demand and inflation and fiscal policy controls government debt. We argue that the basic structure of New Keynesian models implies that monetary policy dominates fiscal policy as a means of controlling inflation. No similar dominance appears to operate for fiscal policy and debt, if debt has to return to its initial level after shocks. Copyright � The Author(s). Journal compilation � Royal Economic Society 2009.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 119 (2009)
Issue (Month): 541 (November)
Contact details of provider:
Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Web page: http://www.res.org.uk/
More information through EDIRC
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Does Monetary Policy make Austerity Irrelevant?
by Mainly Macro in Mainly Macro on 2012-05-28 17:52:00
- Being rude about austerity
by Mainly Macro in Mainly Macro on 2012-11-04 13:49:00
- 'Being Rude about Austerity'
by Mark Thoma in Economist's View on 2012-11-04 10:14:00
- Monetary versus Fiscal: an odd debate
by Mainly Macro in Mainly Macro on 2014-01-06 18:46:00
- Monetarist vs Fiscalist
by Mainly Macro in Mainly Macro on 2014-06-10 10:55:00
- Campbell Leith & Simon Wren-Lewis, 2010.
"Discretionary policy in a monetary union with sovereign debt,"
2010_23, Business School - Economics, University of Glasgow.
- Leith, Campbell & Wren-Lewis, Simon, 2011. "Discretionary policy in a monetary union with sovereign debt," European Economic Review, Elsevier, vol. 55(1), pages 93-117, January.
- Leith, Campbell & Wren-Lewis, Simon, 2010. "Discretionary Policy in a Monetary Union with Sovereign Debt," SIRE Discussion Papers 2010-74, Scottish Institute for Research in Economics (SIRE).
- Guido Ascari & Neil Rankin, 2010.
"The Effectiveness of Government Debt for Demand Management: Sensitivity to Monetary Policy Rules,"
Quaderni di Dipartimento
133, University of Pavia, Department of Economics and Quantitative Methods.
- Ascari, Guido & Rankin, Neil, 2013. "The effectiveness of government debt for demand management: Sensitivity to monetary policy rules," Journal of Economic Dynamics and Control, Elsevier, vol. 37(8), pages 1544-1566.
- Guido Ascari & Neil Rankin, 2010. "The Effectiveness of Government Debt for Demand Management: Sensitivity to Monetary Policy Rules," Discussion Papers 10/25, Department of Economics, University of York.
- Eric M. Leeper, 2010.
"Monetary Science, Fiscal Alchemy,"
NBER Working Papers
16510, National Bureau of Economic Research, Inc.
- Eric M. Leeper, 2010. "Monetary science, fiscal alchemy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 361-434.
- Simon Wren-Lewis, 2011. "Comparing the delegation of monetary and fiscal policy," Economics Series Working Papers 540, University of Oxford, Department of Economics.
- Leith, Campbell & Moldovan, Ioana & Rossi, Raffaele, 2009.
"Monetary and Fiscal Policy under Deep Habits,"
SIRE Discussion Papers
2009-47, Scottish Institute for Research in Economics (SIRE).
- Campbell Leith & Ioana Moldovan & Raffaele Rossi, 2009. "Monetary and fiscal policy under deep habits," Working Papers 2009_32, Business School - Economics, University of Glasgow.
- Campbell Leith & Ioana Moldovan & Raffaele Rossi, 2009. " Monetary and Fiscal Policy under Deep Habits," CDMA Conference Paper Series 0905, Centre for Dynamic Macroeconomic Analysis.
- Alho, Kari E.O., 2011. "How to Restore Sustainability of the Euro?," Discussion Papers 1259, The Research Institute of the Finnish Economy.
- Barbara Annicchiarico & Fabio Di Dio & Francesco Felici & Francesco Nucci, . "Macroeconomic Modelling and the Effects of Policy Reforms: an Assessment for Italy using ITEM and," Working Papers 1, Department of the Treasury, Ministry of the Economy and of Finance.
- Vladimir Tomsik, 2012. "Some insights into monetary and fiscal policy interactions in the Czech Republic," BIS Papers chapters, in: Bank for International Settlements (ed.), Fiscal policy, public debt and monetary policy in emerging market economies, volume 67, pages 161-171 Bank for International Settlements.
- Fabian Eser, 2009.
"Optimal Fiscal Stabilisation through Government Spending,"
2009-W14, Economics Group, Nuffield College, University of Oxford.
- Fabian Eser, 2009. "Optimal Fiscal Stabilisation through Government Spending," Economics Series Working Papers 2009-W14, University of Oxford, Department of Economics.
- Levine, Paul & Pearlman, Joseph, 2011. "Monetary and Fiscal Policy in a DSGE Model of India," Working Papers 11/96, National Institute of Public Finance and Policy.
- Apostolis Philippopoulos & Petros Varthalitis & Vanghelis Vassilatos, 2013. "Optimal Fiscal Action in an Economy with Sovereign Premia and without Monetary Independence: An Application to Italy," CESifo Working Paper Series 4199, CESifo Group Munich.
- Apostolis Philippopoulos & Petros Varthalitis & Vanghelis Vassilatos, 2012. "On the optimal mix of fiscal and monetary policy actions," Working Papers 150, Bank of Greece.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.