Gradualism in monetary policy and fiscal equilibrium

Helder de Mendonça () and Manoel Carlos de Castro Pires ()

Journal of Economic Studies, 2010, vol. 37, issue 3, 327-342

Abstract: Purpose - This paper aims to study a monetary policy problem, where concerns with price stability and with the impact of interest rates on public debt are simultaneously addressed. Design/methodology/approach - The problem is analytically approached under a new Keynesian monetary policy framework to which a budget constraint is added and, subsequently, the model's implications are empirically illustrated by characterizing Brazilian policies. Findings - The findings denote the existence of a trade‐off between inflation target and public debt stability. Therefore the determination of an inflation target cannot neglect this trade‐off. Furthermore, the empirical analysis from the Brazilian case shows that the Central Bank of Brazil takes into consideration public debt when determining the interest rate. Practical implications - The determination of the interest rate in an inflation targeting regime must consider the public debt stability. Originality/value - This paper makes a contribution on the theme of consistency between monetary policy and fiscal equilibrium.

Keywords: Interest rates; Inflation; Monetary policy; National debt (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
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:eme:jespps:v:37:y:2010:i:3:p:327-342

DOI: 10.1108/01443581011061302

Access Statistics for this article

Journal of Economic Studies is currently edited by Prof Mohsen Bahmani-Oskooee

More articles in Journal of Economic Studies from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().