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Price-level determination requires co-ordination of monetary and fiscal policy to ensure a unique rational expectations equilibrium (REE). This paper derives a number of implications for simple interest rate rules resulting from various fiscal strategies. We show that fiscal choices under either...
Persistent link: https://www.econbiz.de/10008771335
We consider monetary-policy rules with inflation-rate targets and interest-rate or money-growth instruments using a flexible-price, perfect-foresight model. There is always a locally-unique target equilibrium. There may also be below-target equilibria (BTE) with inflation always below target and...
Persistent link: https://www.econbiz.de/10014071890
We analyze money financing of fiscal transfers (helicopter money) in two simple New Keynesian models: a "textbook" model in which all money is non-interest-bearing (e.g., all money is currency), and a more realistic model with interest-bearing reserves. In the textbook model with only...
Persistent link: https://www.econbiz.de/10012159954
This study investigates the evolution of central bank profits as fiscal revenue (or: seigniorage) before and in the aftermath of the global financial crisis of 2008-9, focusing on a select group of central banks - namely the Bank of England, the United States Federal Reserve System, the Bank of...
Persistent link: https://www.econbiz.de/10011910944
This paper examines how the scale and composition of public debt can affect economies that implement a combination of "passive" monetary policy and "active" fiscal policy. This policy configuration is argued to be of both historical and contemporary interest in the cases of the U.S. and Japanese...
Persistent link: https://www.econbiz.de/10009347987
This paper examines how the scale and composition of public debt can affect economies that implement a combination of “passive” monetary policy and “active” fiscal policy. This policy configuration is argued to be of both historical and contemporary interest in the cases of the U.S. and...
Persistent link: https://www.econbiz.de/10013120094
This paper derives restrictions on monetary and fiscal policies for determinate equilibria in a two-country monetary union with autarkic members. It finds that a central bank following the Taylor principle may not be sufficient for determinacy unless accompanied by one 'active' fiscal authority...
Persistent link: https://www.econbiz.de/10010436521
The Fiscal Theory of the Price Level (FTPL) is the claim that, in a popular class of theoretical models, the price level is sometimes determined by fiscal policy rather than monetary policy. The models where this claim has been established assume that all decisions are made by an...
Persistent link: https://www.econbiz.de/10012859850
Standard New Keynesian models predict implausibly large and favorable responses of inflation and output to expansionary forward guidance on interest rates. We find that the introduction of permanent or recurring active fiscal policy dampens the response of output and inflation to forward...
Persistent link: https://www.econbiz.de/10012908747
The Fiscal Theory of the Price Level (FTPL) is an important theory that recognizes the interaction between monetary and fiscal policy. In its simplest form, the FTPL assumes that the government commits to a fixed and exogenous present value of primary surpluses implying the adjustment of the...
Persistent link: https://www.econbiz.de/10012909388