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A nominal income growth target for a conservative ECB? When the policy mix matters

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  • Lossani, M.
  • Natale, P.
  • Tirelli, P.

Abstract

This paper contributes to the goal-versus-instrument independence debate for the ECB, exploring how alternative monetary arrangements perform when the fiscal authority pursues a strategy of debt reduction in the long term but retains fiscal flexibility in response to supply shocks. If fiscal policy is countercyclical, a constant nominal income growth target should be assigned to a conservative central banker. In fact, as the fiscal authority and the central bank act independently in setting their countercyclical policies, an activist central banker causes excess volatility of inflation.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 25 (2003)
Issue (Month): 8 (November)
Pages: 685-699

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Handle: RePEc:eee:jpolmo:v:25:y:2003:i:8:p:685-699

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Web page: http://www.elsevier.com/locate/inca/505735

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Cited by:
  1. L. Marattin & M. Marzo & P. Zagaglia, 2010. "A welfare perspective on the fiscal-monetary policy mix: The role of alternative fiscal instruments," Working Papers wp720, Dipartimento Scienze Economiche, Universita' di Bologna.

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