On (Sub)Optimal Monetary Policy Rules under Untied Fiscal Hands
Rivista italiana degli economisti, 2002, issue 2, 219-248
We examine the interplay between monetary and fiscal policies in a context where disturbances to the public deficit process are a primary source of macroeconomic instability. We perform simulations of optimal targeting rules on a sticky-price model "à la" Woodford (1997). Our investigation compares the dynamic adjustment path under inflation targeting with that arising from nominal income growth targeting. When fiscal shocks enter the picture, inflation targeting is a superior strategy. In opposition to Jensen (2002)'s results, we show that an inflation targeter is capable of bringing about the required degree of interest rate inertia. This does not occur at the cost of additional nominal instability.
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers
Working Paper: On (Sub)Optimal Monetary Policy Rules under Untied Fiscal Hands (2002)
Working Paper: On (Sub) Optimal Monetary Policy Rules under Untied Fiscal Hands (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:mul:jqat1f:doi:10.1427/8533:y:2002:i:2:p:219-248
Access Statistics for this article
Rivista italiana degli economisti is currently edited by Giuliano Conti
More articles in Rivista italiana degli economisti from Società editrice il Mulino
Bibliographic data for series maintained by ().