Monetary consequences of alternative fiscal policy rules

Arbeitspapier

In this paper we analyse the monetary impact of alternative fiscal policy rules using the debt and deficit, both mentioned as measures of fiscal policy performance in the Stability and Growth Pact (SGP).We use a New Keynesian model, with endogenous labour supply, distortionary taxation and no private capital.The economy is hit by two fundamental shocks: demand and supply shocks, which are orthogonal to each other.Monetary policy is conducted by an independent central bank that will optimise.Under discretionary monetary policy the size of the inflation bias depends on the fiscal policy regime.Using the timeless perspetive approach to precommitment, output persistence increase compared to the discretionary case.The result holds with the alternative fiscal policy rules, and inflation and output persistence reflects the economic data.With the deficit rules, the autocorrelation of the tax rate is near unity irrespective of the monetary policy regime, and irrespective of the fiscal policy parameters and targets.

Angaben zum Objekt

• ISBN: 952-462-158-4
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bank of Finland Discussion Papers ; No. 20/2004

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Monetary Policy ; Price Level; Inflation; Deflation ; Policy Objectives; Policy Designs and Consistency; Policy Coordination ; Fiscal Policy
• Thema: inflation ; optimal monetary policy ; fiscal policy ; policy coordination

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Railavo, Jukka
• Ereignis: Veröffentlichung
• (wer): Bank of Finland
• (wo): Helsinki
• (wann): 2004

Weitere Informationen

• Handle: http://hdl.handle.net/10419/211988
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ