The dire effects of the lack of monetary and fiscal coordination

Arbeitspapier

What happens if the government's willingness to stabilize a large stock of debt is waning, while the central bank is adamant about preventing a rise in inflation? The large fiscal imbalance brings about inflationary pressures, triggering a monetary tightening, further debt accumulation, and additional inflationary pressure. Thus, the economy will go through a spiral of higher inflation, output contraction, and further debt accumulation. A coordinated commitment to inflate away the portion of debt resulting from a large recession leads to better macroeconomic outcomes by separating the issue of long-run fiscal sustainability from the need for short-run fiscal stabilization. This strategy can also be used to rule out episodes in which the central bank becomes constrained by the zero lower bound.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 2017-19

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Price Level; Inflation; Deflation ; Monetary Policy ; Fiscal Policy ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• Thema: Monetary and fiscal policies ; coordination ; emergency budget ; Markov-switching models ; liquidity traps ; Geldpolitik ; Finanzpolitik ; Stabilisierungspolitik ; Wirkungsanalyse ; Konjunktur ; Inflation ; Niedrigzinspolitik

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bianchi, Francesco ; Melosi, Leonardo
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of Chicago
• (wo): Chicago, IL
• (wann): 2017

Weitere Informationen

• Handle: http://hdl.handle.net/10419/200563
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ