-side effects into account, we get more persistent inflation and output reactions.We also show that the dichotomy does not hold for … discretionary monetary policy, the fiscal policy regime affects the size of the inflation bias.We also show that commitment to an … optimal monetary policy not only corrects the inflation bias but also increases the persistence of output reactions …

. Because actual in.ation remains historically low and data on inflation expectations do not corroborate such risks, warnings … for fiscal inflation are often ignored in policy and academic circles. This paper shows that a canonical NK- DSGE model … results suggest that fiscal inflation concerns have induced a 1.6%-points increase in long-run inflation since 2001. The model …