Abstract
This paper explores the interaction between centralized monetary policy and decentralized fiscal policy in a monetary union. Discretionary monetary policy su¤ers from a failure to commit. Moreover, decentralized fiscal policymakers impose externalities on each other through the influence of their debt policies on the common monetary policy. These imperfections can be alleviated by adopting state-contingent in‡ation targets (to combat the monetary policy commitment problem) and shock-contingent debt targets (to internalize the externalities due to decentralized fiscal policy).
| Original language | English |
|---|---|
| Place of Publication | Tilburg |
| Publisher | Macroeconomics |
| Number of pages | 48 |
| Volume | 1999-108 |
| Publication status | Published - 1999 |
Publication series
| Name | CentER Discussion Paper |
|---|---|
| Volume | 1999-108 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 17 Partnerships for the Goals
Keywords
- discretionary monetary policy
- decentralized fiscal policy
- monetary union
- in‡ation targets
- debt targets
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