Strategic interactions in US monetary and fiscal policies

• 成果类型: Article
• 署名作者: Chen, Xiaoshan; Leeper, Eric M.; Leith, Campbell
• 署名单位: Durham University; University of Virginia; National Bureau of Economic Research; University of Glasgow
• 刊物名称: QUANTITATIVE ECONOMICS
• ISSN/ISSBN: 1759-7323
• DOI: 10.3982/QE1678
• 发表日期: 2022
• 页码: 593-628
• 关键词: Bayesian estimation; monetary and fiscal policy interactions; targeting rules; Markov switching

摘要

We estimate a model in which fiscal and monetary policy obey the targeting rules of distinct policy authorities, with potentially different objective functions. We find: (1) Time-consistent policy fits U.S. time series at least as well as instrument-rules-based behavior; (2) American policies often do not conform to the conventional mix of conservative monetary policy and debt-stabilizing fiscal policy, although economic agents expect fiscal policy to stabilize debt eventually; (3) Even after the Volcker disinflation, policies did not achieve that conventional mix, as fiscal policy did not begin to stabilize debt until the mid 1990s; (4) The high inflation of the 1970s could have been effectively mitigated by either a switch to a fiscal targeting rule or an increase in monetary policy conservatism; (5) If fiscal behavior follows its historic norm to eventually stabilize debt, current high debt levels produce only modest inflation; if confidence in those norms erodes, high debt may deliver substantially more inflation.