Strategic Interactions between an Independent Central Bank and a Myopic Government with Government Debt

We analyse optimal discretionary games between a benevolent central bank and a myopic government in a New Keynesian model. First, when lump-sum taxes are available and public debt is absent, we show that a Nash game results in too much government spending and excessively high interest rates, while fiscal leadership reinstates the cooperative outcome under discretion. Second, we show that this familiar result breaks down when lump-sum taxes are unavailable. With government debt, the Nash equilibrium still entails too much public spending but leads to lower interest rates than the cooperative po

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Year of publication:	2008
Authors:	Stehn, Sven Jari
Other Persons:	Vines, David (contributor)
Publisher:	Washington : International Monetary Fund
Subject:	Theorie \| Theory \| Geldpolitik \| Monetary policy \| Finanzpolitik \| Fiscal policy \| Öffentliche Schulden \| Public debt \| Neoklassische Synthese \| Neoclassical synthesis \| Pauschalbesteuerung \| Lump-sum taxation \| Nichtkooperatives Spiel \| Noncooperative game

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Extent:	Online-Ressource (40 p)
Series:	IMF Working Papers
Type of publication:	Book / Working Paper
Language:	English
Notes:	Description based upon print version of record Contents; I. Introduction; II. The Model; A. Consumers; B. Price Setting; C. Aggregate Demand and Fiscal Policy; D. The System; E. Social Welfare; F. Policy Objectives; G. Calibration; III.Solving for Optimal Policy; A. Cooperative Policy; B. Non-Cooperative Policy under Discretion; Tables; 1. Optimal policy simulations for a transitory cost-push shock; IV.Optimal Policy when Lump-Sum Taxes are Available; A. Cooperative Policy; 1. Commitment; Figures; 1. Dynamic responses to a transitory cost-push shock under optimal policy. .; 2. Discretion B. Non-Cooperative Policy with a Myopic Fiscal Authority2. First-period responses to a transitory cost-push shock under optimal policy for di¤erent degrees of scal myopia (p); 1. Nash; 2. Fiscal Leadership; 3. Robustness; 3. First-period responses to a transitory cost-push shock under optimal policy with a myopic government (p = 0:75) for di¤erent calibrations; V. Optimal Policy when Lump-Sum Taxes are not Available; A. Cooperative Policy; 1. Commitment; 2. Discretion; B. Non-Cooperative Policy with a Myopic Fiscal Authority; 1. Nash; 2. Fiscal Leadership; C. Robustness VI.Optimal InstitutionsA. A Debt Penalty; 4. Optimal policy without lump-sum taxes with a myopic government (p = 0:75) and a debt penalty; B. A Conservative Central Bank; 5. Optimal policy without lump-sum taxes and a myopic government (p = 0:75) for di¤erent degrees of monetary conservatism ( ); VII.Conclusion; Appendix; A. Social Welfare; B. Policy Myopia; C. Solving the Model; 1. Optimal Cooperative Policy; 2. Optimal Non-Cooperative Policy under Discretion; References
ISBN:	978-1-4518-7022-0 ; 978-1-4519-8526-9 ; 978-1-4518-7022-0
Source:	ECONIS - Online Catalogue of the ZBW

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