Time Consistency of Fiscal and Monetary Policy: A Solution
Mats Persson,
Torsten Persson () and
Lars E. O. Svenssor
Additional contact information
Lars E. O. Svenssor: Princeton U
Papers from Princeton University, Research Program in Political Economy
Abstract:
This paper demonstrates how time consistency of the Ramsey policy -- the optimal fiscal and monetary policy under commitment -- can be achieved. Each government should leave its successor with a unique maturity structure for the nominal and indexed debt, such that the marginal benefit of a surprise inflation exactly balances the marginal cost. Unlike in earlier papers on the topic, the result holds for quite a general Ramsey policy, including timevarying polices with positive inflation and positive nominal interest rates. We compare our results with those in Persson, Persson, and Svensson (1987), Calvo and Obstfeld (1990), and Alvarez, Kehoe, and Neumeyer (2004).
JEL-codes: E31 (search for similar items in EconPapers)
Date: 2005-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
http://finance.wharton.upenn.edu/department/Semina ... -svensson-101904.pdf
Related works:
Journal Article: Time Consistency of Fiscal and Monetary Policy: A Solution (2006) 
Working Paper: Time Consistency of Fiscal and Monetary Policy: A Solution (2005) 
Working Paper: Time Consistency of Fiscal and Monetary Policy: A Solution (2005) 
Working Paper: Time Consistency of Fiscal and Monetary Policy: A Solution (2004) 
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:ecl:prirpe:09-03-2005
Access Statistics for this paper
More papers in Papers from Princeton University, Research Program in Political Economy Contact information at EDIRC.
Bibliographic data for series maintained by ().