IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Fiscal Policy Under Balanced Budget And Indeterminacy: A New Keynesian Perspective

  • Giovanni Di Bartolomeo
  • Marco Manzo

We investigate the effect of fiscal policy on equilibrium determinacy in a New Keynesian economy with rule-of-thumb (liquidity constrained) consumers and capital accumulation by focusing on the inter-action between monetary policy and taxation under the assumption of balanced budget. Our main finding is that taxation of firms� monopoly rents reduces the parameter range within which the Taylor principle is insufficient to guarantee equilibrium determinacy; hence it supports the determinacy of the rational expectation equilibrium.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9485.2010.00526.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 57 (2010)
Issue (Month): 4 (09)
Pages: 455-472

as
in new window

Handle: RePEc:bla:scotjp:v:57:y:2010:i:4:p:455-472
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0036-9292

More information through EDIRC

Order Information: Web: http://www.blackwellpublishing.com/subs.asp?ref=0036-9292

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Pearce, Douglas K. & Sobue, Motoshi, 1997. "Uncertainty and the inflation bias of monetary policy," Economics Letters, Elsevier, vol. 57(2), pages 203-207, December.
  2. 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.
  3. Auerbach, Alan J & Hassett, Kevin A, 2002. "Fiscal Policy and Uncertainty," International Finance, Wiley Blackwell, vol. 5(2), pages 229-49, Summer.
  4. Giannoni, Marc P., 2002. "Does Model Uncertainty Justify Caution? Robust Optimal Monetary Policy In A Forward-Looking Model," Macroeconomic Dynamics, Cambridge University Press, vol. 6(01), pages 111-144, February.
  5. 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.
  6. Lawler, Phillip, 2002. "Monetary uncertainty, strategic wage setting and equilibrium employment," Economics Letters, Elsevier, vol. 77(1), pages 35-40, September.
  7. 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.
  8. Glenn Rudebusch, 2000. "Assessing Nominal Income Rules for Monetary Policy with Model and Data Uncertainty," Econometric Society World Congress 2000 Contributed Papers 0065, Econometric Society.
  9. Arturo Estrella & Frederic S. Mishkin, 1999. "Rethinking the Role of NAIRU in Monetary Policy: Implications of Model Formulation and Uncertainty," NBER Chapters, in: Monetary Policy Rules, pages 405-436 National Bureau of Economic Research, Inc.
  10. Lars E. O. Svensson, 1997. "Inflation Targeting: Some Extensions," NBER Working Papers 5962, National Bureau of Economic Research, Inc.
  11. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
  12. Pierpaolo Benigno & Michael Woodford, 2004. "Inflation Stabilization and Welfare: The Case of a Distorted Steady State," NBER Working Papers 10838, National Bureau of Economic Research, Inc.
  13. Söderström, Ulf, 1999. "Monetary policy with uncertain parameters," Working Paper Series 83, Sveriges Riksbank (Central Bank of Sweden).
  14. 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.
  15. Auerbach, Alan J. & Hassett, Kevin, 2007. "Optimal long-run fiscal policy: Constraints, preferences and the resolution of uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 31(5), pages 1451-1472, May.
  16. Marcellino, Massimiliano & Stock, James H. & Watson, Mark W., 2003. "Macroeconomic forecasting in the Euro area: Country specific versus area-wide information," European Economic Review, Elsevier, vol. 47(1), pages 1-18, February.
  17. Avinash Dixit & Luisa Lambertini, 2003. "Interactions of Commitment and Discretion in Monetary and Fiscal Policies," Boston College Working Papers in Economics 575, Boston College Department of Economics.
  18. Rudiger Dornbusch & Carlo A. Favero & Francesco Giavazzi, 1998. "The Immediate Challenges for the European Central Bank," NBER Working Papers 6369, National Bureau of Economic Research, Inc.
  19. 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.
  20. Douglas Hostland & David Dupuis, . "The Implications of Parameter Uncertainty for Medium-Term Fiscal Planning," Working Papers-Department of Finance Canada 2001-21, Department of Finance Canada.
  21. Letterie, Wilko, 1997. " Better Monetary Control May Decrease the Distortion of Stabilisation Policy: A Comment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(3), pages 463-70, September.
  22. repec:cup:macdyn:v:6:y:2002:i:1:p:111-44 is not listed on IDEAS
  23. Dixit, Avinash & Lambertini, Luisa, 2001. "Monetary-fiscal policy interactions and commitment versus discretion in a monetary union," European Economic Review, Elsevier, vol. 45(4-6), pages 977-987, May.
  24. Peersman, Gert & Smets, Frank, 1999. "The Taylor Rule: A Useful Monetary Policy Benchmark for the Euro Area?," International Finance, Wiley Blackwell, vol. 2(1), pages 85-116, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bla:scotjp:v:57:y:2010:i:4:p:455-472. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.