On (Sub)Optimal Monetary Policy Rules under Untied Fiscal Hands

Paolo Zagaglia

Rivista italiana degli economisti, 2002, issue 2, 219-248

Abstract: 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.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://www.rivisteweb.it/download/article/10.1427/8533 (application/pdf)
https://www.rivisteweb.it/doi/10.1427/8533 (text/html)
Access to full text is restricted to subscribers

Related works:
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) HTML/Text

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 ().