Asset Price Targeting Government Spending and Equilibrium Indeterminacy in A Sticky-Price Economy
AbstractThis study investigates aggregate implications of fiscal policy that responds to asset price fluctuations. In our sticky-price model, the monetary authority follows a Taylor rule and the fiscal authority follows a rule that the target of government spending is asset prices and responds negatively to the asset price fluctuations. It is shown that government spending that targets asset prices is a source of equilibrium indeterminacy.
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Bibliographic InfoPaper provided by The Canon Institute for Global Studies in its series CIGS Working Paper Series with number 13-003E.
Date of creation: May 2013
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-05-04 (All new papers)
- NEP-MAC-2014-05-04 (Macroeconomics)
- NEP-MON-2014-05-04 (Monetary Economics)
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