Inflation-Conservatism and Monetary-Fiscal Policy Interactions
Abstract
This paper investigates the stabilization bias that arises in a model of monetary and fiscal policy stabilization of the economy, when assuming that the monetary authority put higher weight on inflation stabilization than society. We demonstrate that inflation-conservatism unambiguously leads to social welfare losses if the fiscal authority acts strategically. Although the precise form of monetary-fiscal interactions depends on the choice of fiscal instrument and on the level of steady state debt, the assessment of gains is robust to these assumptions. We also study how the outcome of stabilization depends on the leadership structure. We develop an algorithm that computes leadership equilibria as well in much wider spectrum of problems with strategic agentsDownload Info
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Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 0801.Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:exe:wpaper:0801
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Related research
Keywords: Monetary and Fiscal Policy; Policy Delegation; Discretion; Leadership Equilibria;Other versions of this item:
- Andrew P. Blake & Tatiana Kirsanova, 2011. "Inflation Conservatism and Monetary-Fiscal Policy Interactions," International Journal of Central Banking, International Journal of Central Banking, vol. 7(2), pages 41-83, June.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
References
References listed on IDEASPlease 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.:
- Ploeg, F. van der & Zeeuw, A.J. de, 1991.
"Difference games and policy evaluation: A conceptual framework,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-377519, Tilburg University.
- de Zeeuw, A J & van der Ploeg, F, 1991. "Difference Games and Policy Evaluation: A Conceptual Framework," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 612-36, October.
- Zeeuw, A.J. de & Ploeg, F. van der, 1987. "Difference games and policy evaluation: A conceptual framework," Research Memorandum 268, Tilburg University, Faculty of Economics and Business Administration.
Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Garreth Rule, 2012. "Collateral management in central bank policy operations," Handbooks, Centre for Central Banking Studies, Bank of England, edition 1, number 31.
- Garreth Rule, 2011. "Issuing central bank securities," Handbooks, Centre for Central Banking Studies, Bank of England, edition 1, number 30.
- Yuting Bai & Tatiana Kirsanova, 2013. "Infrequent Fiscal Stabilization," Working Papers 2013_01, Business School - Economics, University of Glasgow.
- Matteo Fragetta & Tatiana Kirsanova, 2007.
"Strategic Monetary and Fiscal Policy Interactions: An Empirical Investigation,"
Discussion Papers
0706, Exeter University, Department of Economics.
- Fragetta, Matteo & Kirsanova, Tatiana, 2010. "Strategic monetary and fiscal policy interactions: An empirical investigation," European Economic Review, Elsevier, vol. 54(7), pages 855-879, October.
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