On the Interaction of Monetary and Fiscal Policy
Chadha, Jagjit S.
Cambridge Working Papers in Economics
Faculty of Economics
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Chadha, J. S., & Nolan, C. (2004). On the Interaction of Monetary and Fiscal Policy. https://doi.org/10.17863/CAM.5361
In this paper we review some fundamental issues that have been identified by macroeconomists in discussing the co-ordination of monetary and fiscal policy. As Sargent and Wallace (1981) graphically illustrated, the consolidated public sector present-value budget constraint means that monetary and fiscal policy are ultimately joint decisions. However, as we show in a quantitative general equilibrium model, even when fiscal solvency is not an issue, monetary and fiscal policy may still need to be co-ordinated.
monetary and fiscal policy, finite lives, Classification-JEL: E21, E32, E52, E63, optimal simple rules
This record's DOI: https://doi.org/10.17863/CAM.5361
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