Strategic Interaction Between the Fiscal and Monetary Authorities Under Inflation Targeting

Arbeitspapier

This paper studies the strategic interaction between the fiscal and monetary authorities when the monetary policymaker pursues an underlying inflation target. Given that monetary policy is transparent and the fiscal policymaker can commit to a particular policy stance, the Stackelberg equilibrium can be implemented. If the conditions for Stackelberg leadership is not present, policies may end up in a Nash equilibrium, resulting in excessive interest and exchange rate volatility. Legislative restrictions on fiscal policy may then be stabilising, whereas they may be counterproductive in the Stackelberg case.

Object Details

• ISBN: 82-7553-166-7
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Arbeidsnotat ; No. 2000/9

Classification and Topics

• Classification: Wirtschaft ; Policy Objectives; Policy Designs and Consistency; Policy Coordination ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Monetary Policy
• Subject: small open economy ; inflation targeting ; policy coordination ; policy interdependencies

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Leitemo, Kai
• Event: Veröffentlichung
• (who): Norges Bank
• (where): Oslo
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/209782
• Last update: 10.03.2025, 11:44 AM CET