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Designing fiscal and monetary institutions in a second-best world

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  • Beetsma, Roel M. W. J.
  • Lans Bovenberg, A.

Abstract

This paper explores how fiscal and monetary policy interact if commitment and access to lump-sum taxation are limited. We analyze how equilibrium outcomes for inflation, employment, and public spending are affected by the structural features of an economy, such as money holdings, outstanding public debt, labor-market distortions, society s preferences, and the nature of the policy game. In a normative vein, we compare society s welfare across various institutional settings and investigate how society should optimally adjust the preferences of policymakers.
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  • Beetsma, Roel M. W. J. & Lans Bovenberg, A., 1997. "Designing fiscal and monetary institutions in a second-best world," European Journal of Political Economy, Elsevier, vol. 13(1), pages 53-79, February.
    • Handle: RePEc:eee:poleco:v:13:y:1997:i:1:p:53-79
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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