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The behavior of several stochastic dynamic rational expectations models is studied when policy behavior can be described by a linear rule. Four policy components are distinguished: a current response component, a feedback component, an open-loop component and a stochastic component. Policy is...
Persistent link: https://www.econbiz.de/10005248727
This paper explores some implications of the use of national currencies as international reserves. First, a closed economy overlapping-generations model is developed to derive time-consistent tax and inflation policies for a government that is financing a given stream of expenditures. Second,...
Persistent link: https://www.econbiz.de/10005248787
This paper analyzes Krugman's contention that there is a "gold standard paradox" in the speculative attack literature. The paradox occurs if a country's currency appreciates after it runs out of gold or equivalently if a speculative attack can happen only after the country "naturally" runs out...
Persistent link: https://www.econbiz.de/10005084629
The paper studies the inflation rate associated with optimal monetary policy in a standard suite of DSGE models, when fiscal policy is either unrestricted optimal or restricted but supportive of monetary policy. Full nominal price flexibility, nominal prices set one period in advance and...
Persistent link: https://www.econbiz.de/10005084781
In a competitive two-country overlapping generations model with perfect capital mobility, a plan that is individually Pareto optimal (that is Pareto optimal with respect to individual preferences) can be sustained without coordination of national fiscal policies when the fiscal arsenal is...
Persistent link: https://www.econbiz.de/10005084998
The paper studies the solvency of the Indian public sector and the eventual monetization and inflation implied by stabilization of the debt-GNP ratio without any changes in the primary deficit. The nonstationarity of the discounted public debt suggests that indefinite continuation of the pattern...
Persistent link: https://www.econbiz.de/10005085108
This paper, a chapter in the forthcoming Oxford University Press Handbook of the Indian Economy, edited by Chetan Ghate, considers India's experience with fiscal (responsibility) rules during the past decade. After reviewing the basic facts concerning public debt and deficits in India, the...
Persistent link: https://www.econbiz.de/10008631690
The paper considers the implications of the rational expectations New Classical Macroeconomics revolution for the 'rules versus discretion' debate. The following issues are covered: 1) The ineffectiveness of anticipated stabilization policy, 2) Non-clausal models and rational expectations, 3)...
Persistent link: https://www.econbiz.de/10004991915
The paper addresses two issues that arise in estimation of testing of the real effects of anticipated and unanticipated money. First it is shown that identification of the effects of unanticipated (or unperceived) monetary growth on real output is possible only if the a priori restrict ion is...
Persistent link: https://www.econbiz.de/10004991945
Debt neutrality is said to occur if, given a program for public spending on current goods and services over time, the real equilibrium of the economy (private consumption, investment, relative prices, etc.) is independent of the pattern of government borrowing and lump-sum taxation over time....
Persistent link: https://www.econbiz.de/10005710313