Costs of Separating Budgetary Policy from Control of Inflation: A Neglected Aspect of Central Bank Independence
AbstractThe authors investigate the importance of coordinating monetary and fiscal policy in a fully dynamic model. The monetary authority seeks to control inflation while the fiscal authority has a budgetary target. They investigate the resulting Nash equilibrium and the consequences of a period of learning which may arise if each authority is not ex ante sure of the responses of the other. Both of these impact considerably on the outcome and indicate that there may be considerable costs to separating monetary and fiscal policy. Copyright 1998 by Royal Economic Society.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 50 (1998)
Issue (Month): 3 (July)
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- Jérôme Creel, 2002.
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- Tatiana Kirsanova & Sven Jari Stehn & David Vines, 2006. "Five-Equation Macroeconomics A Simple View of the Interactions Between Fiscal Policy and Monetary Policy," Discussion Papers 0610, Exeter University, Department of Economics.
- Jan Libich & Dat Thanh Nguyen & Petr Stehlík, 2011. "Monetary Exit Strategy and Fiscal Spillovers," CAMA Working Papers 2011-04, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Jérôme Creel, 2002. "Strategic interactions between monetary and fiscal policies: a case study for the European Stability Pact," Sciences Po publications info:hdl:2441/3221, Sciences Po.
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