Monetary Policy in the Transition to a Zero Federal Deficit

Christopher Baum and Meral Karasulu ()
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Meral Karasulu: Bogazici University

No 363, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: In the United States, eradication of persistent federal deficits has won broad bipartisan support. At the same time, political pressures have mounted to strengthen the Federal Reserve's explicit concern with price stability. Proposals under consideration would require a much narrower focus on the part of Fed policymakers, and could be interpreted as targeting the price level rather than a negligible rate of inflation. The deficit-reduction and price-stability policies should be analysed in combination, as reductions in the real interest rate triggered by lower deficits will have an impact on optimal monetary policy with anti-inflation and stabilization objectives.

Keywords: monetary policy; deficit reduction (search for similar items in EconPapers)
JEL-codes: E52 E64 (search for similar items in EconPapers)
Pages: 32 pages
Date: 1997-04-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Forthcoming in Focus on Fiscal Policy, Frank Columbus, ed., Hauppage: Nova Science Publishers

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