A Nominal Income Growth Target for a Conservative ECB? When the policy mix matters

Marco Lossani, Piergiovanna Natale () and Patrizio Tirelli
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Marco Lossani: Catholic University of Milan

No 32, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: This paper contributes to the goal-versus-instrument independence debate for the ECB, exploring how alternative monetary arrangements perform when the fiscal authority pursues a strategy of debt reduction in the long term but retains fiscal flexibility in response to supply shocks. If fiscal policy is countercyclical, a constant nominal income growth target should be assigned to a conservative central banker. In fact, as the fiscal authority and the central bank act independently in setting their countercyclical policies, an activist central banker causes excess volatility of inflation.

Pages: 26 pages
Date: 2000-10, Revised 2000-10
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http://repec.dems.unimib.it/repec/pdf/mibwpaper32.pdf First version, 2000 (application/pdf)

Related works:
Journal Article: A nominal income growth target for a conservative ECB? When the policy mix matters (2003)
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