Fiscal and Monetary Policy Interaction: a simulation based analysis of a two-country New Keynesian DSGE model with heterogeneous households
This paper models a fiscal policy that pursues primary balance targets to stabilize the debt-to-GDP ratio in an open and heterogeneous economy where firms combine public and private capital to produce their goods. The model extends the European NAWM presented in Coenen et. al. (2008) and Christoffel et. al. (2008) by broadening the scope for fiscal policy implementation and allowing for heterogeneity in labor skills. The domestic economy is also assumed to follow a forward looking Taylor-rule consistent with an inflation targeting regime. We correct the NAWM specification of the final-goods price indices, the recursive representation of the wage setting rule, and the wage distortion index. We calibrate the model for Brazil to analyze some implications of monetary and fiscal policy interaction and explore some of the implications of fiscal policy in this class of DSGE models.
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.:
- Stephanie Schmitt-Grohé & Martín Uribe, 2006. "Optimal Simple and Implementable Monetary and Fiscal Rules: Expanded Version," NBER Working Papers 12402, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:bcb:wpaper:204. 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: (Francisco Marcos Rodrigues Figueiredo)
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.