scholarly journals Monetary Commitment and Fiscal Discretion: The Optimal Policy Mix

2013 ◽  
Vol 5 (2) ◽  
pp. 187-216
Author(s):  
Stefano Gnocchi
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Central Bank ◽  
Optimal Policy ◽  
Government Expenditure ◽  
Policy Mix ◽  
Equilibrium Outcome ◽  
Policy Game ◽  
Monetary And Fiscal Policy ◽  
Fiscal Authority

We study a noncooperative policy game between monetary and fiscal policy, where only monetary policy can commit to future actions. The equilibrium outcome of the game depends on the strategies available to the monetary policymaker. If strategies are left unrestricted, the central bank can alter the incentives of the fiscal authority in a way that replicates the full commitment solution. If the central bank cannot commit to respond to fiscal policy, the fiscal authority generates fluctuations in government expenditure that undermine the stabilization goals of the central bank. (JEL E12, E23, E31, E52, E58, E62)

scholarly journals Comparative Statics of Central Bank Liquidity Management: Some Insights

2011 ◽  
Vol 2011 ◽  
pp. 1-7 ◽  
Author(s):  
Indranil Bhattacharyya ◽  
Satyananda Sahoo
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Optimal Policy ◽  
Emerging Market ◽  
Policy Instruments ◽  
Comparative Statics ◽  
Sufficient Condition ◽  
Quantum Channels ◽  
Policy Mix ◽  
Liquidity Management

The paper demonstrates the efficacy of liquidity management through both the rate and quantum channels. Using the concepts of autonomous and discretionary liquidity, the paper derives the optimal policy mix of instruments which can be used for stabilizing the price of liquidity. For effective liquidity management, the sufficient condition highlighted in the paper has important implications for developing market-related monetary policy instruments, particularly in emerging market economies.

scholarly journals Independence Before Conservatism: Transparency, Politics and Central Bank Design

2005 ◽  
Vol 6 (1) ◽  
pp. 1-21 ◽  
Author(s):  
Andrew Hughes Hallett ◽  
Diana N. Weymark
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Central Bank ◽  
Institutional Design ◽  
Central Bank Independence ◽  
Optimal Outcomes ◽  
Second Stage ◽  
Stage Game ◽  
The Government ◽  
Monetary And Fiscal Policy

Abstract The problem of monetary policy delegation is formulated as a two-stage game between the government and the central bank. In the first stage the government chooses the institutional design of the central bank. Monetary and fiscal policy are implemented in the second stage. When fiscal policy is taken into account, there is a continuum of combinations of central bank independence and conservatism that produce optimal outcomes. This indeterminacy is resolved by appealing to practical considerations. In particular, it is argued that full central bank independence facilitates the greatest degree of policy transparency and political coherence.

Evolving Monetary/Fiscal Policy Mix in the United States

2012 ◽  
Vol 102 (3) ◽  
pp. 167-172 ◽  
Author(s):  
Francesco Bianchi
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Fiscal Policy ◽  
Regime Change ◽  
The United States ◽  
Policy Mix ◽  
Structural Shocks ◽  
Regime Changes ◽  
The Law ◽  
Fiscal Authority

A micro-founded model that allows for changes in the monetary/fiscal policy mix and in the volatility of structural shocks is fit to US post-WWII data. Agents are aware of the possibility of regime changes and their beliefs have an impact on the law of motion of the macroeconomy. The results show that the '60s and the '70s were characterized by a prolonged period of active fiscal policy and passive monetary policy. The appointment of Volcker marked a change in the conduct of monetary policy, but it took almost ten years for the fiscal authority to start accommodating this regime change.

Global Financial Crisis and Its Impact on Russia

2009 ◽  
pp. 9-27 ◽  
Author(s):  
A. Kudrin
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Central Bank ◽  
Global Financial Crisis ◽  
Developed Countries ◽  
Real Economy ◽  
Energy Prices ◽  
Russian Government ◽  
The Real

The article examines the causes of origin and manifestation of the current global financial crisis and the policies adopted in developed countries in 2007—2008 to deal with it. It considers the effects of the financial crisis on Russia’s economy and monetary policy of the Central Bank in the current conditions as well as the main guidelines for the fiscal policy under different energy prices. The measures for fighting the crisis that the Russian government and the Central Bank use to support the real economy are described.

Theorizing About Post-Keynesian Economics in Australasa

2013 ◽  
pp. 411-435
Author(s):  
Paul Dalziel ◽  
J. W. Nevile
Keyword(s):  
Higher Education ◽  
Economic Growth ◽  
Monetary Policy ◽  
World War Ii ◽  
Fiscal Policy ◽  
Aggregate Demand ◽  
World War ◽  
Keynesian Economics ◽  
Low Levels ◽  
Monetary And Fiscal Policy

There was much in common in the development of post-Keynesian economics in Australia and New Zealand, but there were also many differences. Both countries shared a common heritage in higher education. In the first twenty-five years after World War II, both countries adopted broadly Keynesian policies and experienced very low levels of unemployment. Increasingly over these years more theorizing about macroeconomic policy had what now would be called a post-Keynesian content, but this label was not used till after the event. In both countries, apart from one important factor, the experience of actual monetary policy and theorizing about it were similar. Keynesian ideas were more rapidly adopted in Australia than in many other countries. Not surprisingly for a couple of decades after 1936, analysis of policy and its application was Keynesian rather than post-Keynesian, with fiscal policy playing the major role. The conduct of both monetary and fiscal policy depends on the theory of inflation. This chapter examines post-Keynesian economics in Australasia, focusing on aggregate demand, economic growth, and income distribution policy.

scholarly journals Measuring the Effect of the Zero Lower Bound on Medium- and Longer-Term Interest Rates

2014 ◽  
Vol 104 (10) ◽  
pp. 3154-3185 ◽  
Author(s):  
Eric T. Swanson ◽  
John C. Williams
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Lower Bound ◽  
Private Sector ◽  
Interest Rates ◽  
Zero Lower Bound ◽  
Short Term ◽  
Macroeconomic Models ◽  
Monetary And Fiscal Policy ◽  
Effectiveness Of Monetary Policy

According to standard macroeconomic models, the zero lower bound greatly reduces the effectiveness of monetary policy and increases the efficacy of fiscal policy. However, private-sector decisions depend on the entire path of expected future short-term interest rates, not just the current short-term rate. Put differently, longer-term yields matter. We show how to measure the zero bound's effects on yields of any maturity. Indeed, 1- and 2-year Treasury yields were surprisingly unconstrained throughout 2008 to 2010, suggesting that monetary and fiscal policy were about as effective as usual during this period. Only beginning in late 2011 did these yields become more constrained. (JEL E43, E52, E62)

scholarly journals Optimal Monetary Policy when Information is Market-Generated

2020 ◽  
Vol 130 (628) ◽  
pp. 956-975 ◽  
Author(s):  
Kenza Benhima ◽  
Isabella Blengini
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Optimal Policy ◽  
Labour Supply ◽  
Limited Attention ◽  
Optimal Monetary Policy ◽  
The Public ◽  
Supply Shocks ◽  
Individual Demand ◽  
Real Shocks

Abstract The nature of the private sector’s information changes the optimal conduct of monetary policy. When firms observe their individual demand and use it as a signal of real shocks, the optimal policy consists in maximising the information content of that signal. When real shocks are deflationary (like labour supply shocks), the optimal policy is countercyclical and magnifies price movements, which contrasts with the exogenous information case, where optimal monetary policy is procyclical and stabilises prices. When the central bank communicates its information to the public, this policy is still optimal if firms pay limited attention to central bank announcements.

scholarly journals Robustly Optimal Monetary Policy with Near-Rational Expectations

2010 ◽  
Vol 100 (1) ◽  
pp. 274-303 ◽  
Author(s):  
Michael Woodford
Keyword(s):  
Monetary Policy ◽  
Private Sector ◽  
Central Bank ◽  
Optimal Policy ◽  
Rational Expectations ◽  
Stabilization Policy ◽  
Optimal Monetary Policy ◽  
Inflation Target ◽  
Model Consistency ◽  
Long Run

The paper considers optimal monetary stabilization policy in a forward-looking model, when the central bank recognizes that private sector expectations need not be precisely model-consistent, and wishes to choose a policy that will be as good as possible in the case of any beliefs that are close enough to model-consistency. It is found that commitment continues to be important for optimal policy, that the optimal long-run inflation target is unaffected by the degree of potential distortion of beliefs, and that optimal policy is even more history-dependent than if rational expectations are assumed. (JEL C62, D84, E13, E31, E32, E52)

Sign in / Sign up

Export Citation Format

Share Document