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Crowding Out of Monetary Policy as a Limitation of Fiscal Policy

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  • Hiermeyer, Martin

Abstract

If expansionary fiscal policy is inflationary, expansionary fiscal policy forces an inflation-targeting central bank to be somewhat more restrictive in its monetary policy. This altered central bank policy comes at a cost in terms of output which has to be calculated against the output gain achieved by the expansionary fiscal policy.

Suggested Citation

  • Hiermeyer, Martin, 2016. "Crowding Out of Monetary Policy as a Limitation of Fiscal Policy," MPRA Paper 73491, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:73491
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    References listed on IDEAS

    as
    1. Alston, Richard M & Kearl, J R & Vaughan, Michael B, 1992. "Is There a Consensus among Economists in the 1990's?," American Economic Review, American Economic Association, vol. 82(2), pages 203-209, May.
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    More about this item

    Keywords

    Fiscal Policy;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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