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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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Publisher copy:
10.1111/j.1468-0297.2011.02458.x

Authors


Tatiana Kirsanova More by this author
Simon Wren-Lewis More by this author
Journal:
Economic Journal
Volume:
122
Issue:
559
Publication date:
2012-03-05
DOI:
URN:
uuid:4a3052a2-9924-4848-a836-4d465991c366
Local pid:
oai:economics.ouls.ox.ac.uk:15214
Language:
English

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