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Fiscal policymaking and the central bank institutional constraint

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  • Richard C.K. Burdekin
  • Leroy O. Laney

Abstract

In recent years, a developing literature has concentrated on issues such as the influence of central bank independence on the conduct of monetary policy, and the connected issue as to whether the central bank accommodates government fiscal policy. Much less has been done, however, to investigate the reverse interaction: the extent to which central bank independence influences the formation of fiscal policy. Using pooled cross-section data for twelve industrialized countries over the 1961-83 period, this paper finds some support for the hypothesis that the government budget deficits and inflation performance are indeed both affected by the independence of the centr al bank. Copyright 1988 by WWZ and Helbing & Lichtenhahn Verlag AG

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Bibliographic Info

Paper provided by Federal Reserve Bank of Dallas in its series Research Paper with number 8606.

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Date of creation: 1986
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Handle: RePEc:fip:feddrp:8606

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Keywords: Monetary policy ; Banks and banking; Central ; Fiscal policy;

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References

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  1. Barth, James & Sickles, Robin & Wiest, Philip, 1982. "Assessing the impact of varying economic conditions on federal reserve behavior," Journal of Macroeconomics, Elsevier, vol. 4(1), pages 47-70.
  2. Ahking, Francis W. & Miller, Stephen M., 1985. "The relationship between government deficits, money growthm and inflation," Journal of Macroeconomics, Elsevier, vol. 7(4), pages 447-467.
  3. Evans, Paul, 1985. "Do Large Deficits Produce High Interest Rates?," American Economic Review, American Economic Association, vol. 75(1), pages 68-87, March.
  4. Preston J. Miller, 1983. "Higher deficit policies lead to higher inflation," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
  5. Thomas J. Sargent, 1981. "The ends of four big inflations," Working Papers 158, Federal Reserve Bank of Minneapolis.
  6. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
  7. Bradley, Michael D & Potter, Susan M, 1986. "The State of the Federal Budget and the State of the Economy: Further Evidence," Economic Inquiry, Western Economic Association International, vol. 24(1), pages 143-53, January.
  8. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
  9. Alan S. Blinder, 1982. "Issues in the coordination of monetary and fiscal policies," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 3-46.
  10. Leroy Laney & Thomas Willett, 1983. "Presidential politics, budget deficits, and monetary policy in the United States; 1960–1976," Public Choice, Springer, vol. 40(1), pages 53-69, January.
  11. Richard C.K. Burdekin, 1986. "Fiscal pressure and central bank policy objectives," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue May, pages 1-9.
  12. Robert J. Gordon, 1977. "World Inflation and Monetary Accommodation in Eight Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(2), pages 409-478.
  13. McMillin, W Douglas, 1986. "Federal Deficits, Macrostabilization Goals, and Federal Reserve Behavior," Economic Inquiry, Western Economic Association International, vol. 24(2), pages 257-69, April.
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Cited by:
  1. Bas Aarle & Lans Bovenberg & Matthias Raith, 1995. "Monetary and fiscal policy interaction and government debt stabilization," Journal of Economics, Springer, vol. 62(2), pages 111-140, June.
  2. Blanca Bustamante & Valentín Carril, 1989. "Análisis Teórico y Empírico de la Autonomía del Banco Central," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 26(77), pages 145-159.
  3. Lucotte, Yannick, 2012. "Adoption of inflation targeting and tax revenue performance in emerging market economies: An empirical investigation," Economic Systems, Elsevier, vol. 36(4), pages 609-628.
  4. Francesco Papadia & Gian Ruggiero, 1999. "Central Bank Independence and Budget Constraints for a Stable Euro," Open Economies Review, Springer, vol. 10(1), pages 63-90, February.
  5. Bernhard Eschweiler & Michael D. Bordo, 1995. "Rules, Discretion, and Central Bank Independence: The German Experience 1880-1989," NBER Working Papers 4547, National Bureau of Economic Research, Inc.
  6. Giuseppe Tullio & Marcio Ronci, 1997. "Central Bank Autonomy, the Exchange Rate Constraint and Inflation: The Case of Italy, 1970–1992," Open Economies Review, Springer, vol. 8(1), pages 31-49, January.
  7. Richard C.K. Burdekin & King Banaian & Mark Hallerberg & Pierre L. Siklos, 2011. "Fiscal and monetary institutions and policies: onward and upward?," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(4), pages 340-354, November.
  8. Thomas D. Willett, . "A Political Economy Analysis of the Maastricht and Stability Pact Fiscal Criteria," Claremont Colleges Working Papers 1999-33, Claremont Colleges.
  9. Mas, Ignacio, 1995. "Central bank independence: A critical view from a developing country perspective," World Development, Elsevier, vol. 23(10), pages 1639-1652, October.
  10. Mas, Ignacio, 1994. "Central bank independence : a critical view," Policy Research Working Paper Series 1356, The World Bank.
  11. Donato Masciandaro, 1995. "Designing a central bank: Social player, monetary agent, or banking agent?," Open Economies Review, Springer, vol. 6(4), pages 399-410, October.

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