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Policy Uncertainty, Symbiosis, and the Optimal Fiscal and Monetary Conservativeness

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Author Info
Giovanni Di Bartolomeo (Department of Public Economics, University of Rome 'La Sapienza')
Francesco Giuli (Department of Public Economics, University of Rome 'La Sapienza')
Marco manzo (Department of Public Economics, University of Rome 'La Sapienza')

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Abstract

This paper extends the stabilization game between monetary and fiscal authorities to the case of multiplicative (model) uncertainty. In this context, the “symbiosis assumption”, i.e. fiscal and monetary policy share the same ideal targets, no longer guarantees the achievement of ideal output and inflation, unless the ideal output is equal to its natural level. A time consistency problem arises.

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Publisher Info
Paper provided by EconWPA in its series Macroeconomics with number 0508005.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 21 pages
Date of creation: 05 Aug 2005
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Handle: RePEc:wpa:wuwpma:0508005

Note: Type of Document - pdf; pages: 21
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Web page: http://129.3.20.41

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Related research
Keywords: Monetary-fiscal policy interactions; uncertainty; symbiosis.;

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Find related papers by JEL classification:
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

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    Other versions:
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    Other versions:
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  16. Pierpaolo Benigno & Michael Woodford, 2005. "Inflation Stabilization And Welfare: The Case Of A Distorted Steady State," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1185-1236, December. [Downloadable!] (restricted)
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  17. Glenn D. Rudebusch, 2002. "Assessing Nominal Income Rules for Monetary Policy with Model and Data Uncertainty," Economic Journal, Royal Economic Society, vol. 112(479), pages 402-432, April. [Downloadable!] (restricted)
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  18. repec:cup:cbooks:9780521264440 is not listed on IDEAS
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  21. Luisa Lambertini, 2004. "Monetary-Fiscal Interactions with a Conservative Central Bank," 2004 Meeting Papers 627, Society for Economic Dynamics. [Downloadable!]
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  22. Dixit, Avinash & Lambertini, Luisa, 2003. "Symbiosis of monetary and fiscal policies in a monetary union," Journal of International Economics, Elsevier, vol. 60(2), pages 235-247, August. [Downloadable!] (restricted)
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