Monetary conservatism and fiscal policy

• 成果类型: Article
• 署名作者: Adam, Klaus; Billi, Roberto M.
• 署名单位: University of Mannheim; Centre for Economic Policy Research - UK; Federal Reserve System - USA; Federal Reserve Bank - Kansas City
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2008.09.003
• 发表日期: 2008
• 页码: 1376-1388
• 关键词: Sequential non-cooperative policy games; Discretionary policy; Time consistent policy; Conservative monetary policy

摘要

Does an inflation conservative central bank a la Rogoff (1985) remain desirable in a setting with endogenous fiscal policy? To provide an answer we study monetary and fiscal Policy games Without commitment in a dynamic, stochastic sticky-price economy with monopolistic distortions. Monetary policy determines nominal interest Fates and fiscal policy provides public goods generating private utility. We find that lack of fiscal commitment gives rise to excessive Public spending. The optimal inflation rate internalizing this distortion is positive, but lack of monetary commitment generates too much inflation. A conservative monetary authority thus remains desirable. When fiscal policy is determined before monetary policy each period, the monetary authority Should focus exclusively on stabilizing inflation. Monetary conservatism then eliminates the steady state biases associated with lack of monetary and fiscal commitment and leads to stabilization policy that is close to optimal. (C) 2008 Elsevier B.V. All rights reserved.