How does the timing of markets affect optimal monetary and fiscal policy in sticky price models?

Houyang Du, Ye Guo and Xuan Liu

Economic Modelling, 2018, vol. 72, issue C, 237-248

Abstract: This paper studies optimal monetary and fiscal policy with the Svensson timing in a sticky price model of a stochastic production economy. In this model, the government collects distortionary taxes, prints money, and issues nominal non-state-contingent bonds to finance an exogenous stream of public spending. The numerical results show that (1) optimal monetary and fiscal policy is quantitatively sensitive to the timing of markets; (2) the fundamental nature of optimal monetary and fiscal policy is not sensitive to the timing of markets; and (3) the findings are robust to key structural parameters.

Keywords: Optimal monetary and fiscal policy; Svensson timing; Sticky prices (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:72:y:2018:i:c:p:237-248

DOI: 10.1016/j.econmod.2018.02.001

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