ROGOFF REVISITED: THE CONSERVATIVE CENTRAL BANKER PROPOSITION UNDER ACTIVE FISCAL POLICIES

Andrew Hughes Hallett (), Jan Libich () and Petr Stehlik

CAMA Working Papers from Australian National University, Centre for Applied Macroeconomic Analysis

Abstract: This paper generalizes and qualifies an influential monetary policy result due to Rogoff (1985) by taking fiscal policy, and fiscal-monetary interactions, into account. It shows that an appointment of a conservative central banker may, under a range of circum- stances, (i) increase the average level of inflation; or (ii) decrease this level too much, producing deflation; and/or (iii) reverse the direction of the monetary response to shocks (from tightening to easing and vice versa). We show the conditions under which this can happen.

JEL-codes: E61 E63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: Written 2007-10
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