Fiscal Deficits, Taylor Rules, and Price Dynamics
AbstractThis paper reconsiders the issue of price level determination under interest rate feedback rules using an optimizing general equilibrium framework with overlapping generations and flexible prices. The analysis shows that under fiscal shocks, monetary policy commitment to instrument rules of the Taylor-type might be insufficient for inflation control. It is also demonstrated that the existence of a unique stable equilibrium path for the price level does not require active monetary rules. Copyright International Atlantic Economic Society 2006
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Bibliographic InfoArticle provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.
Volume (Year): 34 (2006)
Issue (Month): 4 (December)
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More information through EDIRC
fiscal deficits; price level determination; Taylor rules; E31; E52; E63;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
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