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Designing fiscal and monetary institutions in a second-best world

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  • Beetsma, R.M.W.J.
  • Bovenberg, A.L.

    (Tilburg University, Center For Economic Research)

Abstract

This paper explores how fiscal and monetary policy interact if commitment and access to lump-sum taxation are limited. We analyze how equilibrium outcomes for inflation, employment, and public spending are affected by the structural features of an economy, such as money holdings, outstanding public debt, labor-market distortions, society s preferences, and the nature of the policy game. In a normative vein, we compare society s welfare across various institutional settings and investigate how society should optimally adjust the preferences of policymakers.
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Suggested Citation

  • Beetsma, R.M.W.J. & Bovenberg, A.L., 1995. "Designing fiscal and monetary institutions in a second-best world," Discussion Paper 1995-47, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:0fbf1a55-e07a-447c-8995-33bced19602f
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    References listed on IDEAS

    as
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    7. Thomas Krichel & Paul Levine & Joseph Pearlman, 1996. "Fiscal and monetary policy in a monetary union: Credible inflation targets or monetized debt?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 132(1), pages 28-54, March.
    8. Tabellini, Guido, 1986. "Money, debt and deficits in a dynamic game," Journal of Economic Dynamics and Control, Elsevier, vol. 10(4), pages 427-442, December.
    9. Carl E. Walsh, 1993. "Optimal contracts for independent central bankers: private information, performance measures and reappointment," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    10. Levine, Paul L & Pearlman, Joseph, 1992. "Fiscal and Monetary Policy Under EMU: Credible Inflation Targets or Unpleasant Monetary Arithmetic?," CEPR Discussion Papers 701, C.E.P.R. Discussion Papers.
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    More about this item

    Keywords

    Central Banks; Monetary Policy; Fiscal Policy; Independence; monetary economics;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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