IDEAS home Printed from
   My bibliography  Save this paper

Issues in the Coordination of Monetary and Fiscal Policy


  • Alan S. Blinder


This paper examines issues in the current debate over coordination between fiscal and monetary policies. Section I1 uses the traditional targets-instruments approach to assess the potential gains from greater coordination. Since greater coordination is often equated with looser money and tighter fiscal policy, two econometric models of the economy are used to estimate the quantitative importance of the policy mix. Expectational effects that arise from the government budget constraint are also analyzed. Section III shows that our attitudes toward the non- coordination problem may be quite different depending on why policies were not coordinated to begin with, and argues that there are plausible circumstances under which it may be better to have uncoordinated policies. Section IV turns to the design of a coordination system. The game-theoretic aspects of having two independent authorities are stressed, and I offer a general reason to expect that uncoordinated behavior will result in tight money and loose fiscal policy even when both parties would prefer easy money and tight fiscal policy. Finally, Section V considers the old "rules versus discretion" debate from the particular perspective of this paper.

Suggested Citation

  • Alan S. Blinder, 1982. "Issues in the Coordination of Monetary and Fiscal Policy," NBER Working Papers 0982, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0982
    Note: EFG

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Feldstein, Martin, 1980. "Tax Rules and the Mismanagment of Monetary Policy," American Economic Review, American Economic Association, vol. 70(2), pages 182-186, May.
    2. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    3. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
    4. Alan J. Auerbach & Laurence J. Kotlikoff, 1983. "National Savings, Economic Welfare, and the Structure of Taxation," NBER Chapters,in: Behavioral Simulation Methods in Tax Policy Analysis, pages 459-498 National Bureau of Economic Research, Inc.
    5. Feldstein, Martin, 1982. "Government deficits and aggregate demand," Journal of Monetary Economics, Elsevier, vol. 9(1), pages 1-20.
    6. McCallum, Bennett T, 1984. "Are Bond-Financed Deficits Inflationary? A Ricardian Analysis," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 123-135, February.
    7. Blinder, Alan S, 1981. "Temporary Income Taxes and Consumer Spending," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 26-53, February.
    8. Smith, Gary, 1982. "Monetarism, Bondism, and Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(2), pages 278-286, May.
    9. McCallum, Bennett T, 1981. "Monetarist Principles and the Money Stock Growth Rule," American Economic Review, American Economic Association, vol. 71(2), pages 134-138, May.
    10. Pyle, David H & Turnovsky, Stephen J, 1976. "The Dynamics of Government Policy in an Inflationary Economy: An "Intermediate-Run" Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 8(4), pages 411-437, November.
    11. Friedman, Milton, 1982. "Monetary Policy: Theory and Practice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(1), pages 98-118, February.
    12. Ben S. Bernanke, 1984. "Permanent Income, Liquidity, and Expenditure on Automobiles: Evidence from Panel Data," The Quarterly Journal of Economics, Oxford University Press, vol. 99(3), pages 587-614.
    13. Blinder, Alan S. & Solow, Robert M., 1973. "Does fiscal policy matter?," Journal of Public Economics, Elsevier, vol. 2(4), pages 319-337.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Fiorella Kostoris Padoa Schioppa, 2006. "The 2005 Reform of the Stability and Growth Pact: Too Little, Too Late?," Bruges European Economic Research Papers 6, European Economic Studies Department, College of Europe.
    2. Olga S. Kuznetsova & Sergey A. Merzlyakov, 2015. "The Role of Uncertain Government Preferences For Fiscal and Monetary Policy Interaction," HSE Working papers WP BRP 102/EC/2015, National Research University Higher School of Economics.
    3. Martin Melecky, 2012. "Choosing The Currency Structure Of Foreign‚ÄźCurrency Debt: A Review Of Policy Approaches," Journal of International Development, John Wiley & Sons, Ltd., vol. 24(2), pages 133-151, March.
    4. Togo, Eriko, 2007. "Coordinating public debt management with fiscal and monetary policies : an analytical framework," Policy Research Working Paper Series 4369, The World Bank.
    5. Alan S. Blinder, 1982. "On the Monetization of Deficits," NBER Working Papers 1052, National Bureau of Economic Research, Inc.

    More about this item


    Access and download statistics


    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:nbr:nberwo:0982. 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: (). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.