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Rogoff revisited: The conservative central banker proposition under active fiscal policies

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  • Hughes Hallett, Andrew
  • Libich, Jan
  • Stehlík, Petr

Abstract

The paper re-examines Rogoff's [Rogoff, K., 1985. The Optimal Degree of Commitment to an Intermediate Monetary Target. Quarterly Journal of Economics 100, 1169-1189.] influential monetary policy result. It shows that responses of a conservative central banker and the resulting macroeconomic outcomes may be substantially different if interactions with (ambitious) fiscal policy are taken into account.

Suggested Citation

  • Hughes Hallett, Andrew & Libich, Jan & Stehlík, Petr, 2009. "Rogoff revisited: The conservative central banker proposition under active fiscal policies," Economics Letters, Elsevier, vol. 104(3), pages 140-143, September.
  • Handle: RePEc:eee:ecolet:v:104:y:2009:i:3:p:140-143
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    References listed on IDEAS

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    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
    2. Avinash Dixit & Luisa Lambertini, 2003. "Interactions of Commitment and Discretion in Monetary and Fiscal Policies," American Economic Review, American Economic Association, vol. 93(5), pages 1522-1542, December.
    3. Andrew Hughes Hallett & Jan Libich & Petr Stehlík, 2011. "Welfare Improving Coordination of Fiscal and Monetary Policy," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 5(1), pages 007-026, March.
    4. Backus, David & Driffill, John, 1985. "Inflation and Reputation," American Economic Review, American Economic Association, vol. 75(3), pages 530-538, June.
    5. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-286, March.
    6. Jan Libich & Andrew Hughes Hallett & Petr Stehlik, 2007. "Monetary And Fiscal Policy Interaction With Various Degrees And Types Of Commitment," CAMA Working Papers 2007-21, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    7. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
    8. Hans Gersbach, 2003. "On the negative social value of central banks' knowledge transparency," Economics of Governance, Springer, vol. 4(2), pages 91-102, August.
    9. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-167, March.
    10. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
    11. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    12. Andrew Hughes Hallett & Jan Libich, 2007. "Fiscal-monetary Interactions: The Effect of Fiscal Restraint and Public Monitoring on Central Bank Credibility," Open Economies Review, Springer, vol. 18(5), pages 559-576, November.
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    Cited by:

    1. Andrew P. Blake & Tatiana Kirsanova, 2011. "Inflation Conservatism and Monetary-Fiscal Policy Interactions," International Journal of Central Banking, International Journal of Central Banking, vol. 7(2), pages 41-83, June.
    2. Foresti, Pasquale, 2017. "Monetary and fiscal policies in interaction in monetary unions," LSE Research Online Documents on Economics 69623, London School of Economics and Political Science, LSE Library.
    3. Andrew Hughes Hallett & Jan Libich & Petr Stehlík, 2011. "Macroprudential Policies and Financial Stability," The Economic Record, The Economic Society of Australia, vol. 87(277), pages 318-334, June.
    4. Andrew Hughes Hallett & Jan Libich & Petr Stehlík, 2011. "Welfare Improving Coordination of Fiscal and Monetary Policy," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 5(1), pages 007-026, March.
    5. Sánchez, Marcelo, 2012. "Restoring the conservative central banker proposition under monetary-fiscal interaction," Economics Letters, Elsevier, vol. 117(2), pages 448-451.

    More about this item

    Keywords

    Conservative central banker Monetary and fiscal policy interaction Inflation Deficit Debt;

    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; Treasury Policy

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