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Optimal Fiscal Feedback on Debt in an Economy with Nominal Rigidities.

Abstract:

We examine the impact of different degrees of fiscal feedback on debt in an economy with nominal rigidities where monetary policy is optimal. We look at the extent to which different degrees of fiscal feedback enhances or detracts from the ability of the monetary authorities to stabilise output and inflation. Using an objective function derived from utility, we find the optimal level of fiscal feedback to be small. There is a clear discontinuity in the behaviour of monetary policy and welfare...

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Volume:
306
Series:
Discussion paper series
Publication date:
2007-01-01
URN:
uuid:373fa73f-2235-4c46-9c53-41ac4c7347d3
Local pid:
oai:economics.ouls.ox.ac.uk:13083
Language:
English

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