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Optimal Time-Consistent Monetary, Fiscal and Debt Maturity Policy

Leeper, Eric M. - 2019

The textbook optimal policy response to an increase in government debt is simple--monetary policy should actively target inflation, and fiscal policy should smooth taxes while ensuring debt sustainability. Such policy prescriptions presuppose an ability to commit. Without that ability, the...

Persistent link: https://www.econbiz.de/10012479609

Reply to "Generalizing the Taylor Principle : A Comment"

Davig, Troy - 2009

Farmer, Waggoner, and Zha (2009) show that a new Keynesian model with a regime-switching monetary policy rule can support multiple solutions that depend only on the fundamental shocks in the model. Their note appears to find solutions in regions of the parameter space where there should be no...

Persistent link: https://www.econbiz.de/10012463729

Endogenous Monetary Policy Regime Change

Davig, Troy - 2006

This paper makes changes in monetary policy rules (or regimes) endogenous. Changes are triggered when certain endogenous variables cross specified thresholds. Rational expectations equilibria are examined in three models of threshold switching to illustrate that (i) expectations formation...

Persistent link: https://www.econbiz.de/10012466260

Generalizing the Taylor Principle

Davig, Troy - 2005

The paper generalizes the Taylor principle---the proposition that central banks can stabilize the macroeconomy by raising their interest rate instrument more than one-for-one in response to higher inflation---to an environment in which reaction coefficients in the monetary policy rule evolve...

Persistent link: https://www.econbiz.de/10012466797

Monetary-Fiscal Policy Interactions and the Price Level : Background and Beyond

Leeper, Eric M. - 2005

The paper presents the fiscal theory of the price level in a variety of models, including endowment economies with lump …-sum taxes and production economies with proportional income taxes. We offer a microeconomic perspective on the fiscal theory by … level. Under certain assumptions on monetary and fiscal behavior, the revaluation effect reflects the fiscal theory …

Persistent link: https://www.econbiz.de/10012467030

Fluctuating Macro Policies and the Fiscal Theory

Davig, Troy - 2005

articulated by the fiscal theory of the price level. The paper quantifies that mechanism and finds it to be important in U.S. data …

Persistent link: https://www.econbiz.de/10012467473

Monetary and Fiscal Policy Switching

Davig, Troy - 2004

A growing body of evidence finds that policy reaction functions vary substantially over different periods in the United States. This paper explores how moving to an environment in which monetary and fiscal regimes evolve according to a Markov process can change the impacts of policy shocks. In...

Persistent link: https://www.econbiz.de/10012468331

Fiscal Limits in Advanced Economies

Leeper, Eric M. - 2011

Aging populations in advanced economies are placing ever-increasing demands on government spending in the form of old-age benefits. Economies that have promised substantially more benefits than they have made provision to finance are heading into a prolonged era of fiscal stress. Unresolved...

Persistent link: https://www.econbiz.de/10012461838

Temporarily Unstable Government Debt and Inflation

Davig, Troy - 2011

Many advanced economies are heading into an era of fiscal stress: populations are aging and governments have made substantially more promises of old-age benefits than they have made provisions to finance. This paper models the era of fiscal stress as stemming from relentlessly growing promised...

Persistent link: https://www.econbiz.de/10012461858

Inflation's Role in Optimal Monetary-Fiscal Policy

Leeper, Eric M. - 2013

We study how the maturity structure of nominal government debt affects optimal monetary and fiscal policy decisions and equilibrium outcomes in the presence of distortionary taxes and sticky prices. Key findings are: (1) there is always a role for current and future inflation innovations to...

Persistent link: https://www.econbiz.de/10012458976