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Policy uncertainty, symbiosis, and the optimal fiscal and monetary conservativeness

Listed author(s):
  • Giovanni Di Bartolomeo

    ()

  • Francesco Giuli
  • Marco Manzo

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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File URL: http://hdl.handle.net/10.1007/s10663-009-9104-9
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Article provided by Springer & Austrian Institute for Economic Research & Austrian Economic Association in its journal Empirica.

Volume (Year): 36 (2009)
Issue (Month): 4 (November)
Pages: 461-474

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Handle: RePEc:kap:empiri:v:36:y:2009:i:4:p:461-474
DOI: 10.1007/s10663-009-9104-9
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