Monetary Policy Rules and the Effects of Fiscal Policy

Noritaka Kudoh and Hong Thang Nguyen

No 220, Discussion paper series. A from Graduate School of Economics and Business Administration, Hokkaido University

Abstract: We explore the implications of adopting a Taylor-type interest-rate rule in a simple monetary growth model in which budget deficits are financed partly by unbacked government debt. To ensure uniqueness of the steady-state equilibrium, monetary policy cannot be either too "active" or too "passive". The effects of fiscal policy depend crucially on whether monetary policy is active or passive, and are independent of the "tightness" of monetary policy.

Keywords: monetary policy rules; fiscal policy; overlapping generations (search for similar items in EconPapers)
JEL-codes: E52 E62 H62 H63 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2010-02
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

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