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Rogoff revisited: The conservative central banker proposition under active fiscal policies

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  • Hughes Hallett, Andrew
  • Libich, Jan
  • Stehlík, Petr

Abstract

The paper re-examines Rogoff's [Rogoff, K., 1985. The Optimal Degree of Commitment to an Intermediate Monetary Target. Quarterly Journal of Economics 100, 1169-1189.] influential monetary policy result. It shows that responses of a conservative central banker and the resulting macroeconomic outcomes may be substantially different if interactions with (ambitious) fiscal policy are taken into account.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 104 (2009)
Issue (Month): 3 (September)
Pages: 140-143

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Handle: RePEc:eee:ecolet:v:104:y:2009:i:3:p:140-143

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Web page: http://www.elsevier.com/locate/ecolet

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Keywords: Conservative central banker Monetary and fiscal policy interaction Inflation Deficit Debt;

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References

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  1. Andrew Hughes Hallett & Jan Libich, 2007. "Fiscal-monetary Interactions: The Effect of Fiscal Restraint and Public Monitoring on Central Bank Credibility," Open Economies Review, Springer, Springer, vol. 18(5), pages 559-576, November.
  2. Hans Gersbach, 2003. "On the negative social value of central banks' knowledge transparency," Economics of Governance, Springer, Springer, vol. 4(2), pages 91-102, 08.
  3. Avinash Dixit & Luisa Lambertini, 2003. "Interactions of Commitment and Discretion in Monetary and Fiscal Policies," Boston College Working Papers in Economics, Boston College Department of Economics 575, Boston College Department of Economics.
  4. Andrew Hughes Hallet & Jan Libich & Petr Stehlik, 2008. "Welfare Improving Coordination Of Fiscal And Monetary Policy," CAMA Working Papers 2008-04, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  5. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Fall.
  6. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, American Economic Association, vol. 82(1), pages 273-86, March.
  7. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, American Economic Association, vol. 85(1), pages 150-67, March.
  8. D. Backus & J. Driffil, 1998. "Inflation and Reputation," Levine's Working Paper Archive 625, David K. Levine.
  9. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(3), pages 473-91, June.
  10. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(4), pages 1169-89, November.
  11. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(1), pages 101-121.
  12. Jan Libich & Andrew Hughes Hallett & Petr Stehlik, 2007. "Monetary And Fiscal Policy Interaction With Various Degrees And Types Of Commitment," CAMA Working Papers 2007-21, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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Cited by:
  1. repec:ltr:wpaper:2009.02 is not listed on IDEAS
  2. Andrew P. Blake & Tatiana Kirsanova, 2011. "Inflation Conservatism and Monetary-Fiscal Policy Interactions," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 7(2), pages 41-83, June.
  3. Andrew Hughes Hallett & Jan Libich & Petr Stehlík, 2011. "Macroprudential Policies and Financial Stability," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 87(277), pages 318-334, 06.
  4. Andrew Hughes Hallett & Jan Libich & Petr Stehlík, 2011. "Welfare Improving Coordination of Fiscal and Monetary Policy," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 5(1), pages 007-026, March.
  5. Sánchez, Marcelo, 2012. "Restoring the conservative central banker proposition under monetary-fiscal interaction," Economics Letters, Elsevier, Elsevier, vol. 117(2), pages 448-451.

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