Public investment, distortionary taxes and monetary policy transparency

Meixing Dai () and Moise Sidiropoulos

MPRA Paper from University Library of Munich, Germany

Abstract: In a two-period model with distortionay tax and public investment, we reexamine the interaction between monetary policy transparency and fiscal bias. We find that the optimal decisions of tax and public investment allow eliminating the effects of fiscal bias and hence neutralizing the impact of monetary policy opacity (lack of political transparency) on the level and variability of inflation and output, independently of institutional quality. Our results are robust under alternative game structures between the private sector, the government and the central bank.

Keywords: bank transparency; distortionay tax; public investment; fiscal bias (search for similar items in EconPapers)
JEL-codes: E52 E58 E62 E63 (search for similar items in EconPapers)
Date: 2009-06
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Related works:
Working Paper: Public investment, distortionary taxes and monetary policy transparency (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:15858

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