Fiscal leadership and central bank design

Andrew Hughes Hallett and Diana N. Weymark

Canadian Journal of Economics/Revue canadienne d'économique, 2007, vol. 40, issue 2, 607-627

Abstract: Abstract. This article investigates the impact, on economic performance, of the timing of moves in a policy game between the government and the central bank for a government that has both redistributional and stabilization objectives. It is shown that both inflation and income inequality are reduced without sacrificing output growth if the government assumes a leadership role compared with a regime in which monetary and fiscal policy are determined simultaneously. Further, it is shown that government leadership benefits both the fiscal and monetary authorities through the enhanced coordination that this arrangement implies. Ce mémoire étudie l'impact sur la performance économique de l'arrimage des actions du gouvernement et de la banque centrale dans le jeu de la politique publique quand les deux instances ont des objectifs de redistribution et de stabilisation. On montre que l'on peut réduire l'inflation et l'inégalité des revenus sans réduire la croissance du produit national si le gouvernement assume un rôle de leadership par opposition au cas de figure où politiques monétaire et fiscale sont déterminées simultanément. De plus, on montre que le leadership gouvernemental sert bien les autorités fiscales et monétaires via la coordination accrue que ces arrangements impliquent.

Date: 2007
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https://doi.org/10.1111/j.1365-2966.2007.00423.x

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Persistent link: https://EconPapers.repec.org/RePEc:wly:canjec:v:40:y:2007:i:2:p:607-627

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