This paper presents a Dynamic New Keynesian model with wealth effects to study the performance of monetary policy under Ricardian and non-Ricardian fiscal regimes. The model is calibrated to euro area quarterly data. The interactions between fiscal policy and interest rate rules have critical implications for equilibrium uniqueness. Within the class of Ricardian fiscal rules, active monetary policies are not necessary for equilibrium determinacy. However, monetary authorities overreacting to inflation not only improve macroeconomic performance, but also generate similar outcomes under different fiscal rules. Conversely, under non-Ricardian fiscal regimes, interest rate pegs are predicted to reduce inflation variability.

Annicchiarico, B., Marini, G., & Piergallini, A. (2008). Monetary policy and fiscal rules. THE B.E. JOURNAL OF MACROECONOMICS, 8(1) [10.2202/1935-1690.1357].

Monetary policy and fiscal rules

ANNICCHIARICO, BARBARA;MARINI, GIANCARLO;PIERGALLINI, ALESSANDRO
2008

Abstract

This paper presents a Dynamic New Keynesian model with wealth effects to study the performance of monetary policy under Ricardian and non-Ricardian fiscal regimes. The model is calibrated to euro area quarterly data. The interactions between fiscal policy and interest rate rules have critical implications for equilibrium uniqueness. Within the class of Ricardian fiscal rules, active monetary policies are not necessary for equilibrium determinacy. However, monetary authorities overreacting to inflation not only improve macroeconomic performance, but also generate similar outcomes under different fiscal rules. Conversely, under non-Ricardian fiscal regimes, interest rate pegs are predicted to reduce inflation variability.
Pubblicato
Rilevanza internazionale
Articolo
Sì, ma tipo non specificato
Settore SECS-P/01 - Economia Politica
eng
Con Impact Factor ISI
fiscal policy rules; monetary policy; wealth effects; OLG
http://www.bepress.com/bejm/vol8/iss1/art4
Annicchiarico, B., Marini, G., & Piergallini, A. (2008). Monetary policy and fiscal rules. THE B.E. JOURNAL OF MACROECONOMICS, 8(1) [10.2202/1935-1690.1357].
Annicchiarico, B; Marini, G; Piergallini, A
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/2108/41243
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