Monetary and fiscal policy rules in a model with capital accumulation and potentially non-superneutral money

Arbeitspapier

We consider the properties of two monetary policy rules (monetary targeting, Taylor-type interest rate rule) in an intertemporal equilibrium model with capital accumulation and two outside assets (government bonds, fiat money). The paper shows that the long-run behaviour of the economy depends critically on whether under the monetary-fiscal regime the steady-state real interest rate is independent of inflation. If this is the case, there exists in our model a unique steady state with stable adjustment dynamics under either monetary policy rule. By contrast, if superneutrality fails, dynamics under the interest rate rule may suffer from global indeterminacy arising from multiple steady states which do not necessarily differ in terms of the 'activeness' of the interest rate feedback on inflation. This is ruled out under monetary targeting.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper Series 1 ; No. 2002,22

Classification and Topics

• Classification: Wirtschaft ; Monetary Policy ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy ; National Deficit; Surplus
• Subject: Monetary Policy ; Fiscal regimes ; Overlapping generations ; Geldmengensteuerung ; Taylor-Regel ; Monetäre Wachstumstheorie ; Overlapping Generations ; Intertemporales Gleichgewicht ; Finanzpolitik ; Neutralität des Geldes ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): von Thadden, Leopold
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/19579
• Last update: 10.03.2025, 11:42 AM CET