On the Interaction of Monetary and Fiscal Policy

Jagjit Chadha and Charles Nolan

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: In this paper we review some fundamental issues that have been identified by macroeconomists in discussing the co-ordination of monetary and fiscal policy. As Sargent and Wallace (1981) graphically illustrated, the consolidated public sector present-value budget constraint means that monetary and fiscal policy are ultimately joint decisions. However, as we show in a quantitative general equilibrium model, even when fiscal solvency is not an issue, monetary and fiscal policy may still need to be co-ordinated.

Keywords: optimal simple rules; monetary and fiscal policy; finite lives (search for similar items in EconPapers)
JEL-codes: E21 E32 E52 E63 (search for similar items in EconPapers)
Pages: 81
Date: 2003-01
New Economics Papers: this item is included in nep-dge and nep-mon
Note: Ma
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0303

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