Degree of Policy Precommitment in the UK: An Empirical Investigation of Monetary and Fiscal Policy Interactions
AbstractThis paper investigates the conduct of monetary and fiscal policy in the UK in the period of the Bank of England independence and before the start of the quantitative easing. Using a simple DSGE New Keynesian model of non-cooperative monetary and fiscal policy interactions under the fiscal intra-period leadership we demonstrate that the past policy in the UK is better explained as following optimal policy under discretion than under commitment. We estimate policy objectives of both policy makers, and derive implied policy rules.
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Bibliographic InfoPaper provided by Exeter University, Department of Economics in its series Discussion Papers with number 1108.
Date of creation: 2011
Date of revision:
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Monetary and Fiscal Policy; Commitment; Discretion; Macroeconomic Stabilisation; Bayesian Estimation;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-25 (All new papers)
- NEP-CBA-2011-06-25 (Central Banking)
- NEP-MAC-2011-06-25 (Macroeconomics)
- NEP-MON-2011-06-25 (Monetary Economics)
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- Paez-Farrell, Juan, 2012. "Should central bankers discount the future? A note," Economics Letters, Elsevier, vol. 114(1), pages 20-22.
- Laura Coroneo & Valentina Corradi & Paulo Santos Monteiro, 2013.
"Testing for optimal monetary policy via moment inequalities,"
13/07, Department of Economics, University of York.
- Coroneo, Laura & Corradi, Valentina & Santos Monteiro, Paulo, 2012. "Testing for optimal monetary policy via moment inequalities," The Warwick Economics Research Paper Series (TWERPS) 985, University of Warwick, Department of Economics.
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