Title of article
Monetaryconservatismandfiscalpolicy
Author/Authors
Klaus Adama، نويسنده ,
Issue Information
روزنامه با شماره پیاپی سال 2008
Pages
13
From page
1376
To page
1388
Abstract
Does aninflationconservativecentralbanka` la Rogoff(1985)remaindesirableina
settingwithendogenousfiscalpolicy?Toprovideananswerwestudymonetaryand
fiscalpolicygameswithoutcommitmentinadynamic,stochasticsticky-priceeconomy
with monopolisticdistortions.Monetarypolicydeterminesnominalinterestratesand
fiscalpolicyprovidespublicgoodsgeneratingprivateutility.Wefindthatlackoffiscal
commitmentgivesrisetoexcessivepublicspending.Theoptimalinflationrate
internalizing thisdistortionispositive,butlackofmonetarycommitmentgenerates
too muchinflation.Aconservativemonetaryauthoritythusremainsdesirable.When
fiscalpolicyisdeterminedbeforemonetarypolicyeachperiod,themonetaryauthority
shouldfocusexclusivelyonstabilizinginflation.Monetaryconservatismtheneliminates
thesteadystatebiasesassociatedwithlackofmonetary and fiscalcommitmentand
leadstostabilizationpolicythatisclosetooptimal.
Keywords
Sequentialnon-cooperativepolicygamesDiscretionary policyTime consistentpolicyConservativemonetarypolicy
Journal title
Journal of Monetary Economics
Serial Year
2008
Journal title
Journal of Monetary Economics
Record number
846256
Link To Document