Monetary Policy and Fiscal Rules

Giancarlo Marini, Alessandro Piergallini () and Barbara Annicchiarico ()

CEIS Research Paper from Tor Vergata University, CEIS

Abstract: This paper studies the performance of monetary policy under alternative fiscal regimes in a dynamic New Keynesian optimizing general equilibrium model with wealth effects. The interactions between fiscal policy and interest rate rules are shown to have relevant implications for the existence of a unique rational expectations equilibrium. When calibrated to Euro Area quarterly data, the model simulation results show that the preferred monetary-fiscal regime for inflation stabilization consists of a generalized Taylor rule with a low degree of inertia coupled with a public debt-GDP ratio targeting rule.

Keywords: Fiscal Policy Rules; Monetary Policy; Wealth Effects (search for similar items in EconPapers)
JEL-codes: E52 E58 E63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-pbe
Date: 2004-03-01
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Journal Article: Monetary Policy and Fiscal Rules (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:rtv:ceisrp:50

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