Fiscal leadership and central bank design

Andrew Hughes Hallett and Diana N. Weymark

Canadian Journal of Economics, 2007, vol. 40, issue 2, 607-627

Abstract: This article investigates the impact, on economic performance, of the timing of moves in a policy game between the government and the central bank for a government that has both redistributional and stabilization objectives. It is shown that both inflation and income inequality are reduced without sacrificing output growth if the government assumes a leadership role compared with a regime in which monetary and fiscal policy are determined simultaneously. Further, it is shown that government leadership benefits both the fiscal and monetary authorities through the enhanced coordination that this arrangement implies.

JEL-codes: E52 E61 F42 (search for similar items in EconPapers)
Date: 2007
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