Monetary Policy Facing Fiscal Indiscipline under Generalized Timing of Actions
AbstractThe paper analyzes interactions between monetary and fiscal policies, both in a single-country and in a monetary-union setting. As the policy interactions are strategic, we use game-theoretic methods. Specifically, we develop a framework that allows for an arbitrary, possibly stochastic timing of moves. Our analysis identifies a number of institutional and policy variables that influence the interplay and outcomes of monetary and fiscal policies, such as the average levels of inflation and debt, and that determine the likelihood of an unpleasant monetarist arithmetic. We then calibrate the model with European Monetary Union data.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 168 (2012)
Issue (Month): 3 (September)
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Web page: http://www.mohr.de/jite
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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- Libich, Jan, 2009.
"A Note On The Anchoring Effect Of Explicit Inflation Targets,"
Cambridge University Press, vol. 13(05), pages 685-697, November.
- Jan Libich, 2009. "A Note on the Anchoring Effect of Explicit Inflation Targets," CAMA Working Papers 2009-21, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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