A Nominal Income Growth Target for a Conservative ECB? When the policy mix matters
AbstractThis paper contributes to the goal-versus-instrument independence debate for the ECB, exploring how alternative monetary arrangements perform when the fiscal authority pursues a strategy of debt reduction in the long term but retains fiscal flexibility in response to supply shocks. If fiscal policy is countercyclical, a constant nominal income growth target should be assigned to a conservative central banker. In fact, as the fiscal authority and the central bank act independently in setting their countercyclical policies, an activist central banker causes excess volatility of inflation.
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Bibliographic InfoPaper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 32.
Length: 26 pages
Date of creation: Oct 2000
Date of revision: Oct 2000
Other versions of this item:
- Lossani, M. & Natale, P. & Tirelli, P., 2003. "A nominal income growth target for a conservative ECB? When the policy mix matters," Journal of Policy Modeling, Elsevier, vol. 25(8), pages 685-699, November.
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