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Structural distortions and decentralized fiscal policies in EMU

Beetsma, Roel; Bovenberg, Ary Lans - 2001

The combination of discretionary monetary policy, labor-market distortions and nominal wage rigidity yields an inflation bias as monetary policy tries to exploit nominal wage contracts to address labour-market distortions Although an inflation target eliminates this inflation bias, it creates a...

Persistent link: https://www.econbiz.de/10011398780

Sticky wages, incomplete pass-through and inflation targeting : what is the right index to target?

Abo-Zaid, Salem M. - 2009

This paper studies monetary policy rules in a small open economy with Inflation Targeting, incomplete pass-through and rigid nominal wages. The paper shows that, when nominal wages are fully flexible and pass-through is low to moderate, the monetary authority should target the consumer price...

Persistent link: https://www.econbiz.de/10011523924

Structural Distortions and Decentralized Fiscal Policies in Emu

Beetsma, Roel M. W. J.; Bovenberg, A. Lans - 2021

The combination of discretionary monetary policy, labor-market distortions and nominal wage rigidity yields an inflation bias as monetary policy tries to exploit nominal wage contracts to address labour-market distortions. Although an inflation target eliminates this inflation bias, it creates a...

Persistent link: https://www.econbiz.de/10013320952

Inflation persistence, Price Indexation and Optimal Simple Interest Rate Rules

Ascari, Guido; Branzoli, Nicola - 2010

We study the properties of the optimal nominal interest rate policy under different levels of price indexation. In our model indexation regulates the sources of inflation persistence. When indexation is zero, the inflation gap is purely forward- looking and inflation persistence depends only on...

Persistent link: https://www.econbiz.de/10010343884

Fiscal Histories

Cochrane, John H. - National Bureau of Economic Research - 2022

The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of … fiscal theory to interpret historical episodes, including the rise and fall of inflation in the 1970s and 1980s, the long … pegs, the ends of hyperinflations, currency crashes, and the success of inflation targets. Going forward, fiscal theory …

Persistent link: https://www.econbiz.de/10013361983

Backward-Looking Interest-Rate Rules, Interest-Rate Smoothing, and Macroeconomic Instability

Benhabib, Jess; Schmitt-Grohé, Stephanie; Uribe, Martín - 2019

The existing literature on the stabilizing properties of interest-rate feedback rules has stressed the perils of linking interest rates to forecasts of future inflation. Such rules have been found to give rise to aggregate fluctuations due to self-fulfilling expectations. In response to this...

Persistent link: https://www.econbiz.de/10014088861

How to starve the beast: fiscal and monetary policy rules

Martin, Fernando M. - 2019

Societies often rely on simple rules to restrict the size and behavior of governments. When fiscal and monetary policies are conducted by a discretionary and profligate government, I find that revenue ceilings vastly outperform debt, deficit and monetary rules, both in effectiveness at curbing...

Persistent link: https://www.econbiz.de/10012137093

Inflation Band Targeting for a Solution to the Time Inconsistency Problem

Aoki, Masaru - 2016

The purpose of this short paper is to show that inflation “band” targeting can solve the “time inconsistency” problem that exists under inflation “point” targeting by setting a relevant target range. Moreover, we show that inflation band targeting has the following two advantages,...

Persistent link: https://www.econbiz.de/10014169710

Inflation Shocks and Interest Rate Rules

Annicchiarico, Barbara - 2006

Recent empirical evidence by Fair (2002,2005) and Giordani (2003) shows that a positive inflation shock with the nominal interest rate held constant has contractionary effects. These results cannot be reconciled with the standard 'New Synthesis' literature. This paper reconsiders the effects of...

Persistent link: https://www.econbiz.de/10012733156

Robust real rate rules

Holden, Tom D. - 2022

Central banks wish to avoid self-fulfilling fluctuations. Monetary rules with a unit response to real rates achieve this under the weakest possible assumptions about the behaviour of households and firms. They are robust to household heterogeneity, hand-to-mouth consumers, non-rational...

Persistent link: https://www.econbiz.de/10013459408

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