RULES AND DISCRETION WITH NONCOORDINATED MONETARY AND FISCAL POLICIES

Economic Inquiry - Tập 25 Số 4 - Trang 619-630 - 1987
Alberto Alesina, Guido Tabellini1,2
1*Carnegie Mellon University and NBER, and University of California in Los Angeles, respectively. We would like to thank Olivier Blanchard, Matthew Canzoneri, Benjamin Friedman, Ross Levine, Tosten Persson, Kenneth Rogoff, Richard Sweeney and a referee of this journal for very useful comments. Earlier versions of this paper were presented at the Bellagio Conference on “Economic Policy in Closed and Open Economics,” Tel Aviv University and NBER
2we thank the participants in these workshops for their comments. The usual disclaimer applies.

Tóm tắt

The time inconsistency of optimal monetary policy is due to the effects of tax distortions. Thus the issue of how to improve upon the time‐consistent suboptimal monetary policy is related to that of the coordination of monetary and fiscal policy. We present a model with three players (the central bark, the fiscal authority, and wage setters) in which distortionary taxes are explicitly modelled. We show that binding commitments to monetary rules are not necessarily welfare improving if monetary and fiscal policy are not coordinated. We also examine the effects of different degrees of independence of the central bank.

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Economic Inquiry

Tập 25 Số 4

619-630

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