Title of article :
Monetaryconservatismandfiscalpolicy
Author/Authors :
Klaus Adama، نويسنده ,
Issue Information :
روزنامه با شماره پیاپی سال 2008
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
Journal title :
Journal of Monetary Economics
