Simple Monetary-Fiscal Targeting Rules
We analyze the characteristics of optimal dynamics in an economy in which neither prices nor wages adjust instantaneously and lump-sum taxes are unavailable as a source of government finance. We then propose that monetar and fiscal policy should be coordinated to satisfy a pair of simple specific targeting rules, a rule for (wage) inflation and a relationship that links the growth of real wages to past price and wage developments, and output gap dynamics. We show that such simple rule-based conduct of policy can do remarkably well in replicating the dynamics of the economy under optimal policy following a given shock.
|Date of creation:||15 Jan 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 01334 462420
Fax: 01334 462444
Web page: http://www.st-andrews.ac.uk/cdmaEmail:
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:san:cdmawp:0801. 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: (Bram Boskamp)
If references are entirely missing, you can add them using this form.