Some Fiscal Implications of Monetary Policy

Harris Dellas and Kevin Salyer ()

Bulletin of Economic Research, 2003, vol. 55, issue 1, pages 21-36

Abstract: We study the implications of alternative monetary targeting procedures for real interest rates and economic activity. We find that countercyclical monetary policy rules lead to higher real interest rates, higher average tax rates, lower output but lower variability of tax rates and consumption relative to procyclical rules. For a country with a high level of public debt (e.g. Italy), the adoption of a countercyclical procedure such as interest rate pegging may conceivably raise public debt servicing costs by more than half a percentage point of GNP. Our analysis suggests that the current debate on the targeting procedures of the European Central Bank ought to be broadened to include a discussion of the fiscal implications of monetary policy. Copyright Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research 2003

Date: 2003
View citations in EconPapers

Downloads: (external link)
http://www.blackwell-synergy.com/servlet/useragent ... &year=2003&part=null link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0307-3378

Access Statistics for this article

More articles in Bulletin of Economic Research from Blackwell Publishing
Series data maintained by Christopher F. Baum ().