Monetary Policy Rules and the Effects of Fiscal Policy
AbstractWe explore the implications of adopting a Taylor-type interest-rate rule in a simple monetary growth model in which budget deficits are financed partly by unbacked government debt. To ensure uniqueness of the steady-state equilibrium, monetary policy cannot be either too "active" or too "passive". The effects of fiscal policy depend crucially on whether monetary policy is active or passive, and are independent of the "tightness" of monetary policy.
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Bibliographic InfoPaper provided by Graduate School of Economics and Business Administration, Hokkaido University in its series Discussion paper series. A with number 220.
Length: 25 pages
Date of creation: Feb 2010
Date of revision:
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monetary policy rules; fiscal policy; overlapping generations; E52; E62; H62; H63;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-20 (All new papers)
- NEP-CBA-2010-02-20 (Central Banking)
- NEP-DGE-2010-02-20 (Dynamic General Equilibrium)
- NEP-MAC-2010-02-20 (Macroeconomics)
- NEP-MON-2010-02-20 (Monetary Economics)
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- Noritaka Kudoh & Hong Thang Nguyen, 2011. "Taylor rules and the effects of debt-financed fiscal policy in a monetary growth model," Economics Bulletin, AccessEcon, vol. 31(3), pages 2480-2490.
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