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Policy uncertainty, symbiosis, and the optimal fiscal and monetary conservativeness

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  • Giovanni Di Bartolomeo

    ()

  • Francesco Giuli
  • Marco Manzo

Abstract

This paper extends the stabilization game between monetary and fiscal authorities to the case of multiplicative (model) uncertainty. In this context, the “symbiosis assumption”, i.e. fiscal and monetary policy share the same ideal targets, no longer guarantees the achievement of ideal output and inflation, unless the ideal output is equal to its natural level. A time consistency problem arises.

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File URL: http://hdl.handle.net/10.1007/s10663-009-9104-9
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Bibliographic Info

Article provided by Springer in its journal Empirica.

Volume (Year): 36 (2009)
Issue (Month): 4 (November)
Pages: 461-474

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Handle: RePEc:kap:empiri:v:36:y:2009:i:4:p:461-474

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Web page: http://www.springerlink.com/link.asp?id=100261

Related research

Keywords: Monetary-fiscal policy interactions; Nash equilibrium uncertainty; Symbiosis; E61; E63;

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Cited by:
  1. Di Bartolomeo, Giovanni & Giuli, Francesco, 2011. "Fiscal and monetary interaction under monetary policy uncertainty," European Journal of Political Economy, Elsevier, vol. 27(2), pages 369-375, June.
  2. Meixing Dai & Moïse Sidiropoulos, 2011. "Fiscal disciplining effect of central bank opacity: Stackelberg versus Nash equilibrium," Working Papers of BETA 2011-17, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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