Shotgun Wedding: Fiscal and Monetary Policy

Marco Bassetto and Thomas Sargent

No 599, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: This paper describes interactions between monetary and fiscal policies that affect equilibrium price levels and interest rates by critically surveying theories about (a) optimal anticipated inflation, (b) optimal unanticipated inflation, and (c) conditions that secure a “nominal anchor” in the sense of a unique price level path. We contrast incomplete theories whose inputs are budget-feasible sequences of government issued bonds and money with complete theories whose inputs are bond-money strategies described as sequences of functions that map time t histories into time t government actions. We cite historical episodes that conform the theoretical insight that lines of authority between a Treasury and a Central Bank can be ambiguous, obscure, and fragile.

Keywords: Nominal anchor; Monetary-fiscal coordination; Central Bank; Government budget (search for similar items in EconPapers)
JEL-codes: E52 E61 E62 E63 (search for similar items in EconPapers)
Pages: 55
Date: 2020-04-08
New Economics Papers: this item is included in nep-mac, nep-mon and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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https://www.minneapolisfed.org/research/sr/sr599.pdf

Related works:
Journal Article: Shotgun Wedding: Fiscal and Monetary Policy (2020)
Working Paper: Shotgun Wedding: Fiscal and Monetary Policy (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:87731

DOI: 10.21034/sr.599

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