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Optimal Monetary and Fiscal Policy in an Economy with Inflation Persistence

Year: 2015

Type: preprint

Abstract: This paper studies a simple New-Keynesian model of fiscal and monetary policy coordination when the policymaker acts under commitment. With a New Keynesian Phillips curve it is optimal to control inflation only through the use of monetary policy. But, when price-setters use a Steinsson (2003) Phillips curve, fiscal policy plays an active role, enabling a greater degree of consumption smoothing.

Source: SSRN Electronic Journal

Authors: Paul Luk, David Vines

Institutions: Hong Kong Institute for Monetary and Financial Research, Australian National University, University of Oxford, Centre for Economic Policy Research

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W1573672219

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