IDEAS home Printed from https://ideas.repec.org/p/isu/genres/10389.html
   My bibliography  Save this paper

Reliance, Composition, and Inflation

Author

Listed:
  • Bhattacharya, Joydeep
  • Haslag, Joseph

Abstract

In this article Joydeep Bhattacharya and Joseph Haslag explore the effect of fiscal policy actions on long-run prices and the inflation rate. They study a model economy in which the central bank is not independent. Indeed, the government explicitly relies on the central bank for a predetermined amount of its revenue. Despite the absence of independence, the central bank does unilaterally control the composition of government paper. Bhattacharya and Haslag show that changes in reliance and composition have long-run impacts on prices and inflation. They conduct two separate policy experiments that suggest how a subservient central bank can retain substantial control over the inflation rate and still meet its revenue requirements set by the government.

Suggested Citation

  • Bhattacharya, Joydeep & Haslag, Joseph, 2000. "Reliance, Composition, and Inflation," Staff General Research Papers Archive 10389, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:10389
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Chari, V. V. & Christiano, Lawrence J. & Kehoe, Patrick J., 1996. "Optimality of the Friedman rule in economies with distorting taxes," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 203-223, April.
    2. Robert E. Lucas, 2001. "Inflation and Welfare," International Economic Association Series, in: Axel Leijonhufvud (ed.), Monetary Theory as a Basis for Monetary Policy, chapter 4, pages 96-142, Palgrave Macmillan.
    3. Isabel Correia & Pedro Teles, 1999. "The Optimal Inflation Tax," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(2), pages 325-346, April.
    4. Fischer, Stanley, 1982. "Seigniorage and the Case for a National Money," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 295-313, April.
    5. Smith, Bruce D, 1988. "Legal Restrictions, "Sunspots," and Peel's Bank Act: The Real Bills Doctrine versus the Quantity Theory Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 3-19, February.
    6. Thomas J. Sargent & Neil Wallace, 1984. "Some Unpleasant Monetarist Arithmetic," Palgrave Macmillan Books, in: Brian Griffiths & Geoffrey E. Wood (ed.), Monetarism in the United Kingdom, pages 15-41, Palgrave Macmillan.
    7. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March.
    8. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-162, May.
    9. Joydeep Bhattacharya & Joseph H. Haslag, 1999. "Monetary policy arithmetic: some recent contributions," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 26-36.
    10. Click, Reid W, 1998. "Seigniorage in a Cross-Section of Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(2), pages 154-171, May.
    11. Rao Aiyagari, S. & Gertler, Mark, 1985. "The backing of government bonds and monetarism," Journal of Monetary Economics, Elsevier, vol. 16(1), pages 19-44, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bernardino Adão & André C. Silva, 2021. "Government financing, inflation, and the financial sector," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1357-1396, June.
    2. CASTRO, Rui & RESENDE, Carlos & RUGE-MURCIA, Francisco J., 2003. "The Backing of Government Debt and the Price Level," Cahiers de recherche 2003-22, Universite de Montreal, Departement de sciences economiques.
    3. Homburg, Stefan, 2017. "A Study in Monetary Macroeconomics," OUP Catalogue, Oxford University Press, number 9780198807537.
    4. Carlos De Resende, 2007. "Cross-Country Estimates of the Degree of Fiscal Dominance and Central Bank Independence," Staff Working Papers 07-36, Bank of Canada.
    5. Martin, Fernando M., 2015. "Debt, inflation and central bank independence," European Economic Review, Elsevier, vol. 79(C), pages 129-150.
    6. Lin, Hsin-Yi & Chu, Hao-Pang, 2013. "Are fiscal deficits inflationary?," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 214-233.
    7. Joydeep Bhattacharya & Joseph H. Haslag, 2001. "On the Use of the Inflation Tax When Nondistortionary Taxes Are Available," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(4), pages 823-841, October.
    8. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    9. Yann Algan & Xavier Ragot, 2005. "Monetary policy with heterogenous agents and credit constraints," PSE Working Papers halshs-00590565, HAL.
    10. Joydeep Bhattacharya & Helle Bunzel & Joseph Haslag, 2005. "The non‐monotonic relationship between seigniorage and inequality," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(2), pages 500-519, May.
    11. Maxime Menuet & Alexandru Minea & Patrick Villieu, 2018. "Deficit, monetization, and economic growth: a case for multiplicity and indeterminacy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(4), pages 819-853, June.
    12. V. V. Chari & Patrick J. Kehoe, 2006. "Modern Macroeconomics in Practice: How Theory Is Shaping Policy," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 3-28, Fall.
    13. Heer, Burkhard, 2003. "Welfare costs of inflation in a dynamic economy with search unemployment," Journal of Economic Dynamics and Control, Elsevier, vol. 28(2), pages 255-272, November.
    14. Barbara Annicchiarico, 2006. "Fiscal Policy and Exchange Rates," Journal of Economics, Springer, vol. 89(2), pages 165-185, November.
    15. Marco Lossani & Piergiovanna Natale & Patrizio Tirelli, 2001. "Fiscal Policy and Inflation Targets: Does Credibility Matter?," Economia politica, Società editrice il Mulino, issue 3, pages 371-392.
    16. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69.
    17. De Fiore, Fiorella, 2000. "The optimal inflation tax when taxes are costly to collect," Working Paper Series 0038, European Central Bank.
    18. Fernando Alvarez & Patrick J. Kehoe & Pablo Andrés Neumeyer, 2002. "The time consistency of monetary and fiscal policies," Working Papers 616, Federal Reserve Bank of Minneapolis.
    19. repec:pra:mprapa:61939 is not listed on IDEAS
    20. Koreshkova, Tatyana A., 2006. "A quantitative analysis of inflation as a tax on the underground economy," Journal of Monetary Economics, Elsevier, vol. 53(4), pages 773-796, May.
    21. Dupor, Bill, 2003. "Optimal random monetary policy with nominal rigidity," Journal of Economic Theory, Elsevier, vol. 112(1), pages 66-78, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:isu:genres:10389. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Curtis Balmer (email available below). General contact details of provider: https://edirc.repec.org/data/deiasus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.