On the Interaction of Monetary and Fiscal Policy
Jagjit Chadha () and
Charles Nolan ()
Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
In this paper we review some fundamental issues that have been identified by macroeconomists in discussing the co-ordination of monetary and fiscal policy. As Sargent and Wallace (1981) graphically illustrated, the consolidated public sector present-value budget constraint means that monetary and fiscal policy are ultimately joint decisions. However, as we show in a quantitative general equilibrium model, even when fiscal solvency is not an issue, monetary and fiscal policy may still need to be co-ordinated.
Keywords: optimal simple rules; monetary and fiscal policy; finite lives (search for similar items in EconPapers)
JEL-codes: E21 E32 E52 E63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mon
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Persistent link: http://EconPapers.repec.org/RePEc:cam:camdae:0303
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