Optimal Monetary and Fiscal Policy in an Economy with Inflation Persistence

This paper studies a simple New-Keynesian model of fiscal and monetary policy coordination when the policymaker acts under commitment. With a New Keynesian Phillips curve it is optimal to control inflation only through the use of monetary policy. But, when price-setters use a Steinsson (2003) Phillips curve, fiscal policy plays an active role, enabling a greater degree of consumption smoothing.

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Year of publication:	2015-05
Authors:	Luk, Paul ; Vines, David
Institutions:	C.E.P.R. Discussion Papers
Subject:	fiscal policy \| monetary policy \| New Keynesian model \| Phillips curve

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Extent:	application/pdf
Series:	CEPR Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	Number 10586
Classification:	E4 - Money and Interest Rates ; E5 - Monetary Policy, Central Banking and the Supply of Money and Credit ; E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011276384