Debt, Deficits, and Deflation in an Economy with Central Bank Independence
AbstractThis paper studies a simple monetary growth model with debt and deficits to investigate the effects of various polices on output and inflation when the central bank is `tough.' In sharp contrast to the vast literature which implicitly or explicitly assumes fiscal dominance regime, in which the fiscal authority commits to the primary deficits, an increase in government expenditures or the government's indebtedness reduces output and inflation: fiscal stimulus aiming at raising output and inflation will do just the opposite. Fighting deflation in a world with central bank independence requires fiscal discipline
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 486.
Date of creation: 11 Aug 2004
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monetary policy; fiscal policy; central bank independence;
Find related papers by JEL classification:
- 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
- H6 - Public Economics - - National Budget, Deficit, and Debt
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- NEP-ALL-2004-08-16 (All new papers)
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- Rangan Gupta & Cobus Vermeulen, 2010.
"Private and Public Health Expenditures in an Endogenous Growth Model with Inflation Targeting,"
Annals of Economics and Finance,
Society for AEF, vol. 11(1), pages 139-153, May.
- Rangan Gupta & Cobus Vermeulen, 2010. "Private and Public Health Expenditures in an Endogenous Growth Model with Inflation Targeting," Working Papers 201001, University of Pretoria, Department of Economics.
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