Gradualism in monetary policy and fiscal equilibrium
Purpose - This paper aims to study a monetary policy problem, where concerns with price stability and with the impact of interest rates on public debt are simultaneously addressed. Design/methodology/approach - The problem is analytically approached under a new Keynesian monetary policy framework to which a budget constraint is added and, subsequently, the model's implications are empirically illustrated by characterizing Brazilian policies. Findings - The findings denote the existence of a trade-off between inflation target and public debt stability. Therefore the determination of an inflation target cannot neglect this trade-off. Furthermore, the empirical analysis from the Brazilian case shows that the Central Bank of Brazil takes into consideration public debt when determining the interest rate. Practical implications - The determination of the interest rate in an inflation targeting regime must consider the public debt stability. Originality/value - This paper makes a contribution on the theme of consistency between monetary policy and fiscal equilibrium.
Volume (Year): 37 (2010)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://www.emeraldinsight.com/jes.htm Email:
When requesting a correction, please mention this item's handle: RePEc:eme:jespps:v:37:y:2010:i:3:p:327-342. 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: (Virginia Chapman)
If references are entirely missing, you can add them using this form.