Why should fiscal imbalances concern policymakers at independent inflation-targeting central banks?

Nigel McClung

No 4/2025, BoF Economics Review from Bank of Finland

Abstract: This note offers a brief snapshot of selected insights from the literature on monetary-fiscal interactions and their implications for inflation-targeting central banks in an era of high public debt. It highlights the fiscal foundations of price stability and potential coordination issues when multiple fiscal authorities exist. The discussion emphasizes the challenges of active fiscal policy, as well as practical suggestions for incorporating fiscal scenarios into central bank policy analysis.

JEL-codes: E31 E52 E62 (search for similar items in EconPapers)
Date: 2025
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