Fluctuating Macro Policies and the Fiscal Theory
In: NBER Macroeconomics Annual 2006, Volume 21
AbstractThis paper estimates regime-switching rules for monetary policy and tax policy over the post-war period in the United States and imposes the estimated policy process on a calibrated dynamic stochastic general equilibrium model with nominal rigidities. Decision rules are locally unique and produce a stationary long-run rational expectations equilibrium in which (lump-sum) tax shocks always affect output and inflation. Tax non-neutralities in the model arise solely through the mechanism articulated by the fiscal theory of the price level. The paper quantifies that mechanism and finds it to be important in U.S. data, reconciling a popular class of monetary models with the evidence that tax shocks have substantial impacts. Because long-run policy behavior determines existence and uniqueness of equilibrium, in a regime-switching environment more accurate qualitative inferences can be gleaned from full-sample information than by conditioning on policy regime.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
This chapter was published in:
This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11180.
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Woodford, Michael, 1995.
"Price-level determinacy without control of a monetary aggregate,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 43(1), pages 1-46, December.
- Michael Woodford, 1995. "Price Level Determinacy Without Control of a Monetary Aggregate," NBER Working Papers 5204, National Bureau of Economic Research, Inc.
- Sims, Christopher A., 1992.
"Interpreting the macroeconomic time series facts : The effects of monetary policy,"
European Economic Review,
Elsevier, vol. 36(5), pages 975-1000, June.
- Christopher A. Sims, 1992. "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy," Cowles Foundation Discussion Papers 1011, Cowles Foundation for Research in Economics, Yale University.
- Christopher A. Sims & Tao Zha, 2005.
"Were There Regime Switches in U.S. Monetary Policy?,"
92, Princeton University, Department of Economics, Center for Economic Policy Studies..
- Christopher A. Sims & Tao Zha, 2006. "Were There Regime Switches in U.S. Monetary Policy?," American Economic Review, American Economic Association, vol. 96(1), pages 54-81, March.
- Christopher A. Sims & Tao Zha, 2004. "Were there regime switches in U.S. monetary policy?," Working Paper 2004-14, Federal Reserve Bank of Atlanta.
- Farmer, Roger E A & Waggoner, Daniel F & Zha, Tao, 2006.
"Indeterminacy in a Forward Looking Regime Switching Model,"
CEPR Discussion Papers
5919, C.E.P.R. Discussion Papers.
- Roger E. A. Farmer & Daniel F. Waggoner & Tao Zha, 2009. "Indeterminacy in a forward-looking regime switching model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 5(1), pages 69-84.
- Roger E. A. Farmer & Daniel F. Waggoner & Tao Zha, 2006. "Indeterminacy in a Forward Looking Regime Switching Model," NBER Working Papers 12540, National Bureau of Economic Research, Inc.
- Roger E.A. Farmer & Daniel F. Waggoner & Tao Zha, 2007. "Indeterminacy in a forward-looking regime-switching model," Working Paper 2006-19, Federal Reserve Bank of Atlanta.
- Sims, Christopher A, 1994. "A Simple Model for Study of the Determination of the Price Level and the Interaction of Monetary and Fiscal Policy," Economic Theory, Springer, vol. 4(3), pages 381-99.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading lists or Wikipedia pages:
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.