Journal Article

The Interactions between Fiscal Policy and Monetary Policy

Tatiana Kirsanova, Sven Jari Stehn and David Vines

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 21, issue 4, pages 532-564
Published in print January 2005 | ISSN: 0266-903X
Published online January 2005 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/gri031
The Interactions between Fiscal Policy and Monetary Policy

More Like This

Show all results sharing these subjects:

  • Economic Development and Growth
  • Public Economics
  • Political Economy
  • Public Policy

GO

Show Summary Details

Preview

This paper studies the interactions of fiscal policy and monetary policy when they stabilize a single economy against shocks in a dynamic setting. If both policy-makers are benevolent, then, in our model, the best outcome is achieved when monetary policy does nearly all of the stabilization. If the monetary authorities are benevolent, but the fiscal authority discounts the future, or aims for an excessive level of output, then a Nash equilibrium will result in large welfare losses: after an inflation shock there will be excessively tight monetary policy, excessive fiscal expansion, and a rapid accumulation of public debt. However, if, in these circumstances, there is a regime of fiscal leadership, then the outcome will be very nearly as good as when both policy-makers are benevolent.

Journal Article.  0 words. 

Subjects: Economic Development and Growth ; Public Economics ; Political Economy ; Public Policy

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.