Issues in the Coordination of Monetary and Fiscal Policy

Alan Blinder

No 982, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines issues in the current debate over coordination between fiscal and monetary policies. Section I1 uses the traditional targets-instruments approach to assess the potential gains from greater coordination. Since greater coordination is often equated with looser money and tighter fiscal policy, two econometric models of the economy are used to estimate the quantitative importance of the policy mix. Expectational effects that arise from the government budget constraint are also analyzed. Section III shows that our attitudes toward the non- coordination problem may be quite different depending on why policies were not coordinated to begin with, and argues that there are plausible circumstances under which it may be better to have uncoordinated policies. Section IV turns to the design of a coordination system. The game-theoretic aspects of having two independent authorities are stressed, and I offer a general reason to expect that uncoordinated behavior will result in tight money and loose fiscal policy even when both parties would prefer easy money and tight fiscal policy. Finally, Section V considers the old "rules versus discretion" debate from the particular perspective of this paper.

Date: 1982-09
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published as in "Monetary Policy Issues in the 1980s", pp. 3-34. Kansas City: Federal Reserve Bank of Kansas City.

Downloads: (external link)
http://www.nber.org/papers/w0982.pdf (application/pdf)

Related works:
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:nbr:nberwo:0982

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w0982

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().