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

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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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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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  1. repec:cup:macdyn:v:6:y:2002:i:1:p:111-44 is not listed on IDEAS
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  6. Thomas Sargent & Noah Williams & Tao Zha, 2006. "The Conquest of South American Inflation," NBER Working Papers 12606, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Schellekens, Philip, 2002. "Caution and Conservatism in the Making of Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 160-77, February.
  8. Lawler, Phillip, 2002. "Monetary uncertainty, strategic wage setting and equilibrium employment," Economics Letters, Elsevier, vol. 77(1), pages 35-40, September. [Downloadable!] (restricted)
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  11. Pearce, Douglas K. & Sobue, Motoshi, 1997. "Uncertainty and the inflation bias of monetary policy," Economics Letters, Elsevier, vol. 57(2), pages 203-207, December. [Downloadable!] (restricted)
  12. Glenn D. Rudebusch, 2001. "Is The Fed Too Timid? Monetary Policy In An Uncertain World," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 203-217, May. [Downloadable!] (restricted)
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  13. Svensson, Lars E.O., 1997. "Inflation Targeting: Some Extensions," Seminar Papers 625, Stockholm University, Institute for International Economic Studies. [Downloadable!]
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  14. 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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  15. 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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  16. Benigno, Pierpaolo & Woodford, Michael, 2006. "Optimal taxation in an RBC model: A linear-quadratic approach," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1445-1489. [Downloadable!] (restricted)
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  17. Luisa Lambertini, 2004. "Monetary-Fiscal Interactions with a Conservative Central Bank," 2004 Meeting Papers 627, Society for Economic Dynamics. [Downloadable!]
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  18. 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)
  19. Auerbach, Alan J & Hassett, Kevin A, 2002. "Fiscal Policy and Uncertainty," International Finance, Blackwell Publishing, vol. 5(2), pages 229-49, Summer. [Downloadable!] (restricted)
  20. Rudi Dornbusch & Carlo Favero & Francesco Giavazzi, 1998. "Immediate challenges for the European Central Bank," Economic Policy, CEPR, CES, MSH, vol. 13(26), pages 15-64, 04. [Downloadable!] (restricted)
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