EconPapers    
Economics at your fingertips  
 

Interaction of fiscal and monetary policy in a monetary union under the zero lower bound constraint

Stefanie Flotho ()
Additional contact information
Stefanie Flotho: Albert-Ludwigs-Universität Freiburg

Annals of Operations Research, 2018, vol. 260, issue 1, 159-196

Abstract: Abstract This paper analyses the interaction of monetary and fiscal policies in a dynamic stochastic general equilibrium model of a monetary union where conventional monetary policy is restricted by the binding zero lower bound constraint. We use the OccBin toolkit to analyze the performance of optimally set monetary and fiscal policies and compare outcomes with simple rules for government spending or the interest rate. Government spending are set independently from each other. We make several findings. First, fiscal policy plays an active role in stabilizing the economy under the binding zero lower bound constraint. Second, properly designed fiscal policy can even shorten the duration of the binding constraint. Third, coordination of policies is not always preferable.

Keywords: Zero lower bound; Monetary union; Fiscal policy; Non-coordination; OccBin-toolkit (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s10479-017-2530-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:annopr:v:260:y:2018:i:1:d:10.1007_s10479-017-2530-3

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10479

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-04-09
Handle: RePEc:spr:annopr:v:260:y:2018:i:1:d:10.1007_s10479-017-2530-3