Stabilization vs. Redistribution: The optimal monetary–fiscal mix
Florin Bilbiie,
Tommaso Monacelli and
Roberto Perotti
Journal of Monetary Economics, 2024, vol. 147, issue S
Abstract:
Stabilization and redistribution are intertwined in a model with heterogeneity, imperfect insurance, and nominal rigidity—making fiscal and monetary policy inextricably linked for aggregate-demand management. Movements in inequality induced by fiscal transfers make the flexible-price equilibrium suboptimal, thus triggering a stabilization vs redistribution tradeoff. Likewise, changes in government spending that are associated with changes in the distribution of taxes (progressive vs. regressive) induce a tradeoff for monetary policy: the central bank cannot stabilize real activity at its efficient level (including insurance) and simultaneously avoid inflation. Fiscal policy can be used in conjunction to monetary policy to strike the optimal balance between stabilization and insurance (redistribution) motives.
Keywords: Inequality; Redistribution; Aggregate demand; Fiscal transfers; Optimal monetary–fiscal policy; TANK (search for similar items in EconPapers)
JEL-codes: D91 E21 E62 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S030439322400076X
Full text for ScienceDirect subscribers only
Related works:
Working Paper: Stabilization vs. Redistribution: The Optimal Monetary-Fiscal Mix (2024) 
Working Paper: Stabilization vs. Redistribution: The Optimal Monetary-Fiscal Mix (2024) 
Working Paper: Stabilization vs. Redistribution: the Optimal Monetary-Fiscal Mix (2020) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:147:y:2024:i:s:s030439322400076x
DOI: 10.1016/j.jmoneco.2024.103623
Access Statistics for this article
Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser
More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().