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While the established literature on central bank communication has traditionally dealt with communication of monetary … policy messages to financial markets and the wider public, central bank communication on fiscal policy has so far received … little attention. This paper empirically reviews the intensity of central banks' fiscal communication by five central banks …
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We study a model in which policy aims at aggregate price stability. A fiscal imbalance materializes that, if uncorrected, must cause inflation, but the imbalance may get corrected in the future with some probability. By maintaining price stability in the near term, monetary policy can buy time...
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