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Designing fiscal and monetary institutions in a second-best world

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  • Beetsma, Roel M. W. J.
  • Lans Bovenberg, A.

Abstract

This paper explores how fiscal and monetary policy interact if commitment and access to lump-sum taxation are limited. We analyze how equilibrium outcomes for inflation, employment, and public spending are affected by the structural features of an economy, such as money holdings, outstanding public debt, labor-market distortions, society s preferences, and the nature of the policy game. In a normative vein, we compare society s welfare across various institutional settings and investigate how society should optimally adjust the preferences of policymakers.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 13 (1997)
Issue (Month): 1 (February)
Pages: 53-79

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Handle: RePEc:eee:poleco:v:13:y:1997:i:1:p:53-79

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Web page: http://www.elsevier.com/locate/inca/505544

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  1. Thomas Krichel & Paul Levine & Joseph Pearlman, 1994. "Fiscal and Monetary Policy in a Monetary Union: Credible Inflation Targets or Monetised Debt?," School of Economics Discussion Papers 9403, School of Economics, University of Surrey.
  2. Levine, Paul & Brociner, Andrew, 1994. "Fiscal policy coordination and EMU : A dynamic game approach," Journal of Economic Dynamics and Control, Elsevier, vol. 18(3-4), pages 699-729.
  3. Levine, Paul, 1993. "Fiscal Policy Co-ordination under EMU and the Choice of Monetary Instrument," The Manchester School of Economic & Social Studies, University of Manchester, vol. 61(0), pages 1-12, Suppl..
  4. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 38, pages 195-225.
  5. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  6. Carl E. Walsh, 1993. "Optimal contracts for independent central bankers: private information, performance measures and reappointment," Working Papers in Applied Economic Theory 93-02, Federal Reserve Bank of San Francisco.
  7. Jensen, Henrik, 1994. "Loss of monetary discretion in a simple dynamic policy game," Journal of Economic Dynamics and Control, Elsevier, vol. 18(3-4), pages 763-779.
  8. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
  9. Eijffinger, S.C.W. & Schaling, E., 1993. "Central bank independence: Theory and evidence (Revised version)," Discussion Paper 1993-25, Tilburg University, Center for Economic Research.
  10. Persson, Torsten & Tabellini, Guido, 1993. "Designing institutions for monetary stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 53-84, December.
  11. Levine, Paul L & Pearlman, Joseph, 1992. "Fiscal and Monetary Policy Under EMU: Credible Inflation Targets or Unpleasant Monetary Arithmetic?," CEPR Discussion Papers 701, C.E.P.R. Discussion Papers.
  12. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
  13. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
  14. Tabellini, Guido, 1986. "Money, debt and deficits in a dynamic game," Journal of Economic Dynamics and Control, Elsevier, vol. 10(4), pages 427-442, December.
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