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Optimal monetary and fiscal policy: a linear-quadratic approach
Benigno, Pierpaolo; Woodford, Michael - Federal Reserve Board (Board of Governors of the … - 2004
We propose an integrated treatment of the problems of optimal monetary and fiscal policy, for an economy in which prices are sticky (so that the supply-side effects of tax changes are more complex than in standard fiscal analyses) and the only available sources of government revenue are...
Persistent link: https://www.econbiz.de/10005368129
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Simple monetary rules under fiscal dominance
Kumhof, Michael; Nunes, Ricardo; Yakadina, Irina - Federal Reserve Board (Board of Governors of the … - 2008
This paper asks whether an aggressive monetary policy response to inflation is feasible in countries that suffer from fiscal dominance, as long as monetary policy also responds to fiscal variables. We find that if nominal interest rates are allowed to respond to government debt, even aggressive...
Persistent link: https://www.econbiz.de/10005712686
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Is there a fiscal free lunch in a liquidity trap?
Erceg, Christopher J.; Linde, Jesper - Federal Reserve Board (Board of Governors of the … - 2010
This paper uses a DSGE model to examine the effects of an expansion in government spending in a liquidity trap. If the … liquidity trap is very prolonged, the spending multiplier can be much larger than in normal circumstances, and the budgetary … expansion. Our paper addresses this question in a model environment in which the duration of the liquidity trap is determined …
Persistent link: https://www.econbiz.de/10008679698
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Asymmetric shocks in a currency union with monetary and fiscal handcuffs?
Erceg, Christopher J.; Lindé, Jesper - Federal Reserve Board (Board of Governors of the … - 2010
This paper investigates the impact of the asymmetric shocks within a currency union in a framework that takes account of the zero bound constraint on policy rates, and also allows for constraints on fiscal policy. In this environment, we document that the usual optimal currency argument showing...
Persistent link: https://www.econbiz.de/10008799639
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The optimal degree of discretion in monetary policy
Athey, Susan; Atkeson, Andrew; Kehoe, Patrick J. - Federal Reserve Board (Board of Governors of the … - 2004
How much discretion should the monetary authority have in setting its policy? This question is analyzed in an economy with an agreed-upon social welfare function that depends on the randomly fluctuating state of the economy. The monetary authority has private information about that state. In the...
Persistent link: https://www.econbiz.de/10005368142
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Optimal inflation persistence: Ramsey taxation with capital and habits
Chugh, Sanjay - Federal Reserve Board (Board of Governors of the … - 2005
Ramsey models of fiscal and monetary policy with perfectly-competitive product markets and a fixed supply of capital predict highly volatile inflation with no serial correlation. In this paper, we show that an otherwise-standard Ramsey model that incorporates capital accumulation and habit...
Persistent link: https://www.econbiz.de/10005368152
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Monetary policy's role in exchange rate behavior
Faust, Jon; Rogers, John H. - Federal Reserve Board (Board of Governors of the … - 1999
While much empirical work has addressed the role of monetary policy shocks in exchange rate behavior, conclusions have been clouded by the lack of plausible identifying assumptions. We apply a recently developed inference procedure allowing us to relax dubious identifying assumptions. This work...
Persistent link: https://www.econbiz.de/10005368248
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The choice of a monetary policy reaction function in a simple optimizing model
Henderson, Dale W.; Kim, Jinill - Federal Reserve Board (Board of Governors of the … - 1998
Monetary policy reaction functions are compared in a simple optimizing model with one-period nominal stickiness, i.i.d. shocks, and no capital accumulation. The interest rate is the instrument and is either kept constant, "interest rate targeting" for short, or used in targeting one of the...
Persistent link: https://www.econbiz.de/10005368273
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Monetary discretion, pricing complementarity and dynamic multiple equilibria
King, Robert G.; Wolman, Alexander L. - Federal Reserve Board (Board of Governors of the … - 2004
In a plain-vanilla New Keynesian model with two-period staggered price-setting, discretionary monetary policy leads to multiple equilibria. Complementarity between the pricing decisions of forward-looking firms underlies the multiplicity, which is intrinsically dynamic in nature. At each point...
Persistent link: https://www.econbiz.de/10005368289
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U.S. monetary policy and econometric modeling: tales from the FOMC transcripts 1984-1991
Edison, Hali J.; Marquez, Jaime - Federal Reserve Board (Board of Governors of the … - 1998
This paper uses the transcripts from the FOMC meetings to characterize the interactions between policymakers and macro models in the formulation of U.S. monetary policy. We develop a taxonomy of these interactions and present two case studies. The first case focuses on the debate on the choice...
Persistent link: https://www.econbiz.de/10005368291