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Anchoring fiscal expectations

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  • Eric M. Leeper

    (Reserve Bank of New Zealand)

Abstract

This paper draws on a lecture on 12 November 2008 in Wellington, when the author was a Professorial Fellow in Monetary and Financial Economics at Victoria University and the Reserve Bank of New Zealand.Leeper argues that there are remarkable parallels between how monetary and fiscal policies operate on the macro economy and that these parallels are sufficient to lead us to think about transforming fiscal policy and fiscal institutions as many countries have transformed monetary policy and monetary institutions. Making fiscal transparency comparable to monetary transparency requires fiscal authorities to discuss future possible fiscal policies explicitly. Enhanced fiscal transparency can help anchor expectations of fiscal policy and make fiscal actions more predictable and effective. As advanced economies move into a prolonged period of heightened fiscal activity, anchoring fiscal expectations will become an increasingly important aspect of macroeconomic policy.

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Bibliographic Info

Article provided by Reserve Bank of New Zealand in its journal Reserve Bank of New Zealand Bulletin.

Volume (Year): 72 (2009)
Issue (Month): (September)
Pages: 17-42

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Handle: RePEc:nzb:nzbbul:sept2009:3

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